While many countries–the U.S included–are still struggling to rebound from recent struggles in the housing market, China is trying to control the flow of outside investments into its housing infrastructure.
As the New York Times put it: “So many speculators want to move money into China that is biggest problem has been how to keep them out.”
China has been fighting this influx of outside investors by keeping mortgage rates low, thereby making it easier for Chinese people to afford the loans necessary to buy a home.
However, this has created another problem for China–namely, the prices of homes have begun rising sharply. In fact, “an 800-square foot [apartment] can cost 35 times a young college graduate’s first-year salary.”
Some have responded to these high prices by asking the state bank system to issue another batch of loans at ultra low rates, but the Peoples Bank of China is worried about inflation–and its focus is on letting “the renminbi appreciate gradually against the dollar” so imports can remain cheap while competition remains strong on domestic goods.
In addition to all these things, China’s bankers face another problem–the sudden and mass death of thousands of pigs “floating in a river near Shanghai in March.” This has made millions of China’s people reluctant to buy pork products. And it was followed by a new form of bird flu that has turned other Chinese citizens away from chicken.
Together with the rising housing prices and questions surrounding loan rates, the reduction in cash flow to pork and poultry producers poses difficult problems for the Chinese economy.