Chapter 4 Section 3: Real Estate with Excessive Currency Flow

Over-issuance of currency can easily cause inflation, and people have an intuitive understanding of this causal relationship. We may see this set of data many times: the balance of China’s broad money supply M2 was 1.53 trillion yuan in 1990, and by the end of December 2010, the balance of broad money supply M2 was 72.58 trillion yuan, a year-on-year An increase of 19.7% (in 2009, the year-on-year increase was 27.7%). The fastest growing period of China's broad money supply was 1992 (31.30%), 1993 (37.30%) and 1994 (34.50%), when extremely serious inflation occurred. There are two reasons:

One is that the money supply is growing too fast, unmatched in the world. The second is that China lacks areas that can absorb these super-issued currencies. The real estate and stock markets are both in their infancy and limited in scale.This means that as soon as the currency is overissued, without any buffer, it will immediately appear in the market, driving up prices. In order to circumvent this defect, the government began to implement monetization in more and more fields, because only in this way can the excess currency be absorbed. As a result, housing reform, medical reform, and education reform began.Through the reform, a considerable part of the responsibilities that should have been borne by the public finances have been transferred to the public.In fact, monetization is closely related to the de-accountability of public finances.To put it bluntly, some of the public goods that should have been provided by the finance now need money to buy, and the demand for money will naturally increase.In the context of monetization, the monetization of housing, medical care, education and the expansion of the stock market have become important areas for absorbing excess currency.

The degree of monetization in China now far exceeds that of the United States. In November 2010, Fudan University economics professor and doctoral supervisor Wei Sen pointed out that the monetization of the Chinese economy is accelerating.China's current M2 stock is about 70 trillion, and GDP is about 35 trillion, which means that we have 2 yuan of currency for 1 yuan of GDP. A lot.Of course, "inflation" has inflated, greatly inflated. As for whether the CPI must also rise, that is another matter.The U.S. recently issued 600 billion U.S. dollars in banknotes, causing an uproar all over the world, but the GDP of the U.S. is currently only more than 0.6 U.S. dollars more than M2, which is much lower than ours!Now, the degree of monetization of our economy is much higher than that of the United States.I call this change the acceleration of the monetization of the Chinese economy.

China's monetization process is a sigh of relief. The deepening of monetization means that the responsibilities of the people have increased. Take education as an example.As early as in 1993, Article 48 of the "Outline for China's Educational Reform and Development" clearly stated that "gradually increase the proportion of national financial education expenditures in the gross national product, reaching 4% by the end of this century."In other words, according to this outline, by 2000, 4% should have become the lower limit of the proportion of fiscal education expenditure.But unfortunately, even the goal 18 years ago has not been achieved so far.According to World Bank statistics in 2001, in high-income countries such as Australia, Canada, France, Japan, the United Kingdom, and the United States, public education expenditures accounted for an average of 4.8% of GDP, while low- and middle-income countries such as Colombia, Cuba, Jordan, and Peru Education expenditure averaged 5.6% of GDP.

According to the data calculations published by the Finance Department of the Ministry of Education, the "China Statistical Yearbook 2009" and the National Bureau of Statistics, in the 10 years from 2000 to 2009, with a target of 4%, the national financial education expenditures for 10 years have accumulated "debt" It has reached 1684.3 billion yuan.The gap left by fiscal debts is naturally borne by the public. It is worth mentioning that China's monetization is different from that of mature market economy countries.Monetization has played a very important role in the economic development of Western countries.The development of trade, the allocation of resources, and the flow of population all need to rely on monetization to proceed better.Moreover, the resources of Western countries are mainly in the hands of private individuals. Monetization has increased private wealth, fully released consumption momentum, and promoted economic development.

China's resources, especially natural resources, are basically in the hands of the government.The deepening of monetization has twofold benefits for governments. First, monetization means that the various levels of government that control abundant resources become richer and control greater wealth.Take land for example. According to data released by the National Land and Resources Work Conference held on January 7, 2011: During the "Eleventh Five-Year Plan" period, my country's land transfer revenue exceeded 7 trillion yuan.In 2010, the year of "the most stringent real estate regulation in history", the total price of land transfer transactions across the country was 2.7 trillion yuan, an increase of more than 70% year-on-year.Xu Shaoshi, Minister of Land and Resources, said frankly: "Urban development is increasingly dependent on land, the distribution of benefits is unreasonable, social conflicts are prominent, and the land transfer system needs to be further reformed and improved."

The monetization of land is essentially a process in which wealth is transferred from the hands of the people to governments at all levels and related vested interest groups. As Xu Shaoshi said, the "unreasonable distribution of interests" is first of all the unreasonable distribution of urban and rural land interests: the unit of ten thousand yuan is taken from farmers, and the unit of ten thousand yuan is used for auction in the land market. .Secondly, the time allocation is unreasonable. The previous mayor can sell the land of the next three mayors, which not only overdraws the stamina of urban development, but also overdraws the rights and interests of future generations.The unreasonable distribution of benefits also includes the unreasonable input and output of different industries, and the dependence on extensive land use and low-efficiency industries makes real estate like a sponge, continuously attracting capital flow from other industrial fields, causing blood loss in emerging industries, The real economy is unprofitable, and the bubble in the real estate sector is getting bigger and bigger, threatening the country's financial security and economic operation.

The government's income from land sales has risen in a straight line.According to data released by the Ministry of Land and Resources: From 2006 to 2010, the total revenue of land transfer fees nationwide was 700 billion yuan, nearly 1.3 trillion yuan, more than 960 billion yuan, 1.59 trillion yuan, and 2.7 trillion yuan.The five-year total income is 7.25 trillion yuan!This is effectively equivalent to a hidden tax on the people. Second, in the process of monetization, due to the implementation of de-responsibility, the proportion of public expenditure has decreased, which has "saved" a large amount of wealth for the government to invest in, making investment an important support force for China's economic development.But this has led to imbalances and even deformities in the economic structure.

"Sponge" must be found The impact of monetization on housing prices in China is obvious. To put it bluntly, monetization is actually the process of finding a "sponge" to absorb currency. In the case of excessive money supply, the government must find a sponge to absorb the excess money, otherwise, it will lead to a terrifying rise in prices. On December 2, 2010, "People's Daily Overseas Edition" published an interview with Li Daokui, member of the Monetary Policy Committee of the People's Bank of China. Reporter: At present, my country's currency stock has exceeded 10 trillion U.S. dollars, ranking first in the world. Doesn't this mean that our country has more money available?

Li Daokui: But what are its negative effects?Its deposit form is unstable, and it can be realized and converted at any time.It is not like stocks, cars, or fixed assets. Its form can be changed at any time, and it can be taken from the bank or from under the mattress of the people to buy things at any time. If it is withdrawn in large quantities, it will be a threat to the banking system. The shock is also a shock to the entire economy. The reporter asked: Where do you lead the money? Li Daokui: It is necessary to develop the capital market. The stock market needs to be expanded. Through the expansion of the stock market, funds will be drawn out step by step.At the same time, it is necessary to orderly allow funds to invest abroad. The premise is that it is orderly and controllable, and gradually invest abroad.

From Li Daokui's answer, it is not difficult to see that even the money "taken from under the mattresses of ordinary people" makes him uneasy. What if the money is solidified in stocks, cars, and fixed assets?It is not as easy to realize as cash, and the impact on the banking system and the entire economy will be much reduced! Obviously, it is precisely the successive rises in housing prices that have acted as a huge sponge for absorbing excess currency, and this absorbing effect is irreplaceable.However, this kind of absorbing effect has disadvantages. It can easily lead to the flow of funds from the real economy to the real estate market, thereby causing a bleeding effect on the real economy and affecting the sustainable development of the economy.Therefore, regulation of the property market has become inevitable. On the other hand, if funds in the real estate market, especially a large amount of speculative funds, flow to the commodity market due to fear control, it will inevitably cause a rapid rise in prices and cause serious inflation. As a result, regulation of the property market is often at both ends, and it is difficult to choose. Under such circumstances, as far as the government is concerned, the best regulatory measure to achieve the best of both worlds is to levy property taxes so that speculative funds in the real estate market cannot withdraw and let real estate speculators part of their profits. quietly transferred to the hands of relevant departments. When the property tax was first discussed, the government and the experts had a high degree of agreement: to transfer the heavy tax burden from the development link and the transaction link to the holding link, that is to say, the property tax is actually a transfer issue. The total amount did not increase, and no one mentioned the transfer issue later, only the property tax was mentioned, from "transfer" to "tax increase", the difference between the two words is worlds apart.Now, the property tax has already started a pilot project by borrowing the "shell" of the property tax. Through the analysis of the monetization process of real estate, we will understand the mystery. Real estate monetization can be roughly divided into three stages: One is the welfare housing distribution era before 1998. The second is the monetization distribution and real estate marketization reform stage starting from July 1998 when the State Council issued Document No. 23 ("Notice on Further Deepening Urban Housing System Reform and Accelerating Housing Construction").In May 1998, the People's Bank of China officially launched the "Administrative Measures for Personal Housing Loans", and new concepts such as loans for buying houses and mortgages landed in mainland China. The era of monetization in the housing market has begun.In order to cooperate with this process, from May 1, 1996 to February 21, 2002, the People's Bank of China cut interest rates eight times in an unprecedented manner to "divert savings, stimulate domestic demand, and stimulate consumption."To put it bluntly, we are trying our best to get ordinary people to buy houses. From 2001 onwards, housing prices began to rise - an inevitable consequence of the monetization of housing. The third is the era of commercial housing monopoly market since 2003.It can also be identified as May 9, 2002, the beginning of this era. On this day, the Ministry of Land and Resources stopped the land agreement transfer method that had been in use for many years, and began to implement the land bidding, auction and listing system from July 1.The industry calls it "the new round of land revolution".Subsequently, across the country, land prices and housing prices soared, and "land kings" appeared frequently in various cities. In 2003, "SARS" appeared in China-every time there is a big crisis, China will respond by stimulating economic growth.This is a rule. On August 12, 2003, the State Council issued the "Notice on Promoting the Sustainable and Healthy Development of the Real Estate Market" [Guo Fa (2003) No. 18], also known as "Document No. 18", which regards the real estate industry as "the pillar industry of the national economy" , In essence, played a role in encouraging the development of real estate.Starting from the "No. 18 Document", the public product characteristics of housing have been weakened, and housing prices have continued to soar. From 1998 to 2003, the price per square meter of national commercial housing only increased by 343 yuan.In 2004, the first year of the full implementation of the No. 18 document "promoting the sustainable and healthy development of the real estate market", the house price per square meter rose by 352 yuan compared with the previous year. On March 31, 2004, the Ministry of Land and Resources and the Ministry of Supervision jointly issued the "Notice on Continuing to Carry Out the Implementation of Supervision on the Assignment of Commercial Land Use Rights by Bidding, Auction, and Listing", stipulating that August 31 of that year was the date for the agreement to transfer commercial land use After that, all construction land must be transferred through the form of "bidding, auction and listing", which is called the "8.31" deadline in the industry. This means that monetization does not tolerate "fish that slipped through the net", and the door to a sharp rise in housing prices has been completely opened. The rapid rise of China's housing prices began in 2003. In addition to the well-known factors, it is closely related to the new mission of China's real estate - to absorb excess currency. Look at the data released by the two groups of central banks: At the end of July 2003 ("Document No. 18" defines the real estate industry as the demarcation point of the status of "the pillar industry of the national economy"), the balance of broad money supply M2 was 20.62 trillion yuan, and by the end of December 2007, the balance of M2 had It reached 40.34 trillion yuan, an increase of nearly 20 trillion yuan in four years! By the end of December 2009, the balance of M2 had reached 60.6 trillion yuan, an increase of 20 trillion yuan in just two years! The consequences of such a large amount of currency issuance without the absorption of real estate would be unimaginable.At least, the severity of inflation will exceed that of 1993 and 1994.However, the inflation during this period was not as serious as that time, because the money was fixed on the houses. By 2005, housing prices rose too fast and became one of the hottest topics in the "two sessions". After the "Two Sessions", at the end of March, the State Council issued the "Notice on Effectively Stabilizing Housing Prices", "Raise the stabilization of housing prices to a political level, establish a government responsibility system, and the provincial government shall take overall responsibility. , to hold the relevant person accountable." A month later, on April 27, Wen Jiabao presided over an executive meeting of the State Council, and the "Eight Rules of the State" were promulgated.On May 11, the General Office of the State Council forwarded the "Opinions on Doing a Good Job of Stabilizing Housing Prices" prepared by seven departments as early as April 30.Another "National Eight Articles"! However, after a short period of adjustment, house prices rose retaliatoryly in the second half of 2005.Taking Beijing as an example, from January to July 2005, the average price of commercial off-plan housing rose by 21.9% year-on-year. By the beginning of 2006, housing prices continued to soar, the media denounced, and public complaints arose. On May 17, Wen Jiabao presided over an executive meeting of the State Council, and the "Six National Measures" were promulgated.Only 12 days later, the "Nine Ministries and Commissions and Fifteen Articles" were promulgated, which further refined the "National Six Articles". On the financial front, the central bank raised interest rates twice.On July 22, 2005, the China Banking Regulatory Commission issued nine measures in the "Notice on Further Strengthening Real Estate Credit Management" to strictly control real estate credit risks. In 2006, in less than 6 months, the control army composed of nine ministries and commissions issued no less than 13 real estate control policies. However, the government regulation in 2006 did not curb the rise of housing prices as expected. In October 2006, Beijing led the country with an increase of 10.7%.Since July 2005, housing prices in Beijing have risen for 15 consecutive months.Regulatory policies have become more stringent, however, housing prices have risen higher each time. During this period, the money supply increased rapidly. Beginning at the end of 2007, housing prices began to adjust - this adjustment is affected by the subprime mortgage crisis, rather than the result of regulation. However, the downturn in the property market made the government worried about the subprime mortgage crisis introduce supportive measures again. From October 2008 onwards, these measures were introduced one after another.After the Spring Festival in 2009, the property market picked up, and both volume and price rose. At the end of 2009, "panic buying" even occurred in some cities, and the housing prices went from the trough to the peak.In China's first-tier cities, there is almost one price a day--by comparison, it is not difficult to find that a large amount of credit has begun to be released, and real estate has assumed the function of absorbing excess currency. Housing prices rose as soon as they were encouraged by the policy, and soon the government had to adjust. On December 14, 2009, the State Council held an executive meeting, clearly stating that "to curb the excessive rise of housing prices in some cities", and opened the curtain of "repressive policies", which marked that China's real estate policy has shifted from stimulating consumption to "Suppression" of house prices.However, the real estate market in 2010, like a runaway horse, continued to maintain a high-spirited upward momentum, and housing prices in Beijing and other first-tier cities soon entered the era of 30,000 yuan. On April 1, the State Council announced a new policy, deciding to suspend the issuance of loans for the purchase of third and above housing in areas where commodity housing prices are too high, rising too fast, and supply tight; Non-local residents with insurance payment certificates are suspended from issuing housing loans... In fact, as far as housing prices are concerned, whether it is regulated or not is actually not important. What is important is whether the money printing machine can be controlled and the housing security responsibility can be fulfilled. If these two are achieved, the pace of housing price rises can be slowed down.Otherwise, increasing money supply while regulating and controlling is tantamount to adding fuel to the fire, and it is impossible to really restrain housing prices. In short, if the currency is controlled, the housing price is like water without a source; if the currency is oversupplied, the housing price is like a tree with roots. Interested friends, you can compare the following group of broad money supply balance data (all publicly released by the central bank) with China's housing prices to see if the convergence is consistent: 11.76 trillion in 1999 and 13.24 trillion in 2000 , 15.28 trillion in 2001, 18.32 trillion in 2002, 21.92 trillion in 2003, 25.01 trillion in 2004, 29.6 trillion in 2005, 34.55 trillion in 2006, 40.34 trillion in 2007, It was 47.51 trillion in 2008, 60.62 trillion in 2009, and 72.58 trillion in 2010... From 1999 to 2010, the compound annual growth rate of China's GDP was 13% (prices in that year were larger than comparable prices), and M2 The compound annual growth rate is 17%. There are more and more currencies, and the housing prices are getting higher and higher, and the correlation between the two is very high.Alternatively, real estate can also be regarded as a kind of currency - housing currency, which has many similarities with China's earliest physical currency - livestock currency. So, how big is the real estate sector's role in absorbing currency after quantification? On the morning of March 17, 2008, Qi Ji, vice minister of the Ministry of Housing and Urban-Rural Development, said in a collective interview with Chinese and foreign journalists about the situation of "housing security" that, calculated by household registration population, the per capita residential building area in cities and towns has reached about 28 square meters. Add 1 square meter.The data given by Qi Ji is as of 2007, when the country's urban population totaled 594 million.In other words, in 2007, the total area of ​​urban housing in my country was 16.632 billion square meters. In 2008, the national commercial housing sales area was 590 million square meters. In 2009, the national commercial housing sales area was 849 million square meters. The square meter is 5182 yuan.According to this estimate, as of the end of December 2009, the total market value of urban housing in the country should be 93.6 trillion yuan. If the market value of office buildings and commercial buildings in the country is included, it will be even more astonishing—the total national GDP in 2009 was only 33.54. trillion yuan. What is the significance of this data? This means that the ratio of the total value of real estate to GDP has surpassed both that of the United States before the subprime mortgage crisis, and that of Japan when the Japanese real estate bubble burst in 1990! Under the premise of housing monetization, if housing prices fall, people’s expectations for rising housing prices will be changed, resulting in the weakening of the real estate sector’s ability to absorb money, which will inevitably lead to a huge flow of funds to the commodity basin, resulting in unbearable inflation. Between high housing prices and inflation, it is obvious which policy is more tolerant and which one is more worrying. The government must seek a lasting and stable flow of excess currency. This is the problem of high housing prices in another perspective.