A Probe Into The Development Of China's Real Estate Against The Background Of The Financial Crisis

In September 2008, the economical shock caused by the subprime crisis brought out the worldwide financial crisis. The USA's fourth largest investment bank Lehman Brothers Holdings declared bankrupt after Fannie Mae and Freddie Mac have been taken over by the USA government, which makes it the largest financial corporation in USA's history. The world third largest financial institution AIG—American International Group has got into financing difficulties. The largest investment bank Merrill Lynch has been merged by Bank of America at the price of $44 billion. Goldman Sachs and Morgan Stanley declared that they will restructure from investment companies to bank—holding companies, which disengage them from the high risk—high income investment mode. Facing the sudden challenge, all governments are acting forcefully to relieve the market strike probable financial shake.Since China introduced reform and opening policies, its real estate sector has broken away from the welfare—oriented public housing distribution system in 1998 and started its market—oriented process. Meanwhile, the government has put forward diversified policies to regulate the real estate sector in the following 10 years, in order to make it move along a rational track. However, if we check the policies in the development of China's real estate during the past 10 years, we can see that the housing reform in China has gone through a long and rough history. Huge profit has attracted a great deal of social investment, but it makes the market—oriented process deviate from the national economy and the people's livelihood. Though the rising price of houses has brought the GDP boom, we must see that there are many problems and conflicts in the development of real estate. This paper probes into the current situation of China's real estate sector against the background of the financial crisis with economics theories, and offers reasonable proposals to the development of China's real estate sector based on the new policy of the expansion of domestic demand.Above all, the analysis of background is the base of scientific studies. From the financial shock caused by the subprime crisis, we can conclude that the debility of the real estate market directly brought about the US subprime crisis. But we cannot put it all down to the real estate sector's own. None of the economy risings and fallings in history is caused by one single sector. China has a special national condition. Its development and policies are evidently different from the US and other countries. Though there are a number of problems in China's real estate sector, we cannot simply say that"homo—subprime crisis"will emerge in China. The essential cause of the US subprime crisis is the conflicts in its financial system. The excess credit has led the US economy to an overdraft much earlier. The weakness of real estate led to the crisis explosion in this sector. This paper defines the US subprime crisis as a sector crisis caused by the overflow of credit from the view of hierarchy theory of needs. The US economy influences the whole word by the US dollars and will make the sector crisis evolve into worldwide financial turmoil.Secondly, as studying the development of real estate sector, this paper holds such an opinion that, however the real estate develops, it cannot break away from its natural essence, habitation. How to evaluate whether the real estate sector of a country is flourishing or not? We cannot say irresponsibly that how much economical power a sector provide to the society or how to judge the proportion of a sector in the national economy. Based on China's condition, which has a population of 1.3 billion, it must start from people's livelihood to achieve the goal of harmonious society. While bringing the driving motive of real estate into play, it must meet the demand of most people and raise the civil purchasing power. It must lower the doorsill of house buying to ensure common people's hard demand. This paper assumes that, one day all the people in our country have the ability to buy houses, it is time of requirement bloom, which is the most ideal status of real estate. In this condition, the paper analyses several practical problems of real estate, and offers a macroscopical blueprint to China's real estate: balance the conflicts in the market by macroscopic readjustment and control; deepen the market—oriented process, especially in the distributing mode of means of production, to make the whole society share the land and achieve the goal of harmonious development.Lastly, against the back ground of financial crisis, this paper indicates that the steady development of China's economy demands the favorable development of real estate, which is based on sound sector laws and regulations. Under the situation of high house prices, a new current of house buying swept the whole country in 2007. Medium and low income families don't have the ability to buy houses and the gap between the wealthy and poor enlarges. Where should the China's real estate go in the future? The government has put forward several policies lead the real estate sector to a rational road. This paper points out the government's attitude is positive and initiative. But we should also see that at the present time, we are not running out of"houses"but real—life politics, in order avoid the foam of the real estate. Under the politics of expansion of domestic demand, the real estate sector will have a good perspective coming from its essence and investment characteristics. This paper indicates that the real estate politics should attach importance to land supply, household register system, people's livelihood and macroeconomic control, which is an effective choice to keep the sustainable development of China's real estate.