Friday, September 26, 2008

Topsey Turvey Economics

funniest news piece about the economy on Sina Finance. Translated into English, it reads:

President of SoHo China, Pan Shiqi, in pleading for government help in the real estate market, warns that suffering of developers would lead to higher housing prices, not lower. Houses, he says, like coal, pork, and baby milk formula, will have higher prices when supply shrinks.

I have to solute him for not mention just one non-durable product, but three as comparison; I'd also solute him for understanding concept of higher price with negative supply sift. However, before doing that, he needs also assume the market for housing, a durable good, is in equilibrium - then why the hell he cries for government again? China has been worrying about an American style meltdown originated from real-estate market, and this quote can be viewed as an empty threat from the troubled developers.

Don't ask Chinese real estate tycoon about economics.

It reminds me of a research paper by Chicago economist. The gist of that thesis is that inequality isn't as bad as previously believed when measured in real consumptions because the rich buys differently. While the poor has enjoyed steady or declining prices as a benefit of Chinese exports, the rich has not been as lucky - the price of luxury cohort of the same goods don't decrease as much.

The consumers of China's contaminated diary products, because they can not afford the more expensive foreign brands, would surely disagree.

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  1. Is that why they sell apartments in Shenzhen for 8 million yuan? And yet, most of the apartments sit vacant for years.

  2. yup, for those astronomically priced Shenzhen apartments, my guess is that those who can afford it don't really need it.

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