Determining The Impact Of Recent Growth In Unregulated Finance On China’s Real Estate Market
MetadataShow full item record
The purpose of this thesis is to analyze how recent growth in China’s unregulated finance system has affected the growth and stability of China’s real estate market. The thesis takes a comprehensive approach to analyze two of the main drivers of growth in unregulated finance, investors and local governments, and their relationship to the real estate market. Wealth management products (WMPs) are sources of unregulated finance for domestic Chinese investors that have grown exponentially in the past decade. WMPs provide high rates of return to investors by investing in real estate, small businesses, and other relatively high risk projects. Like investors, local governments also have had a need for new investments. Local government debt as a percentage of GDP has continued to increase, and local governments have utilized urban developmentsand land salesto fund their budget deficits. Local governments have increased their use of local government financing platforms (LGFPs), state-owned enterprises that issue loans and raise funds on behalf of local governments, to get around loan restrictions placed on them by the central government. Thus, large-scale urban projects have continued to be produced at a high rate. Ghost cities are large urban districts built by local governments that sit almost entirely vacant. Case studies on two ghost cities, Kangbashi New Area and Zhengdong New District, exhibit some of the factors affecting local governments and how they relate to the real estate market. Going forward, potential unregulated finance issues include the rise of unregulated mobile finance for investors and high debt levels for local governments.