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Awash in Empty Homes, China Asks Migrant Workers to Settle Down
By OWEN GUO
2016-03-11 08:16:12
 
Source: nytimes.com

BEIJING — Migrant workers are the unsung heroes of China’s economic miracle. Numbering more than 270 million, they abandon their impoverished farms and villages to move to the cities, where they run the factories and build the highways and high-rises that have made China’s growth the envy of the world.

Now, as China’s economy slows, the country’s leaders have a new mission for them: Buy homes.

China is looking for ways to get migrant workers to help buy up a huge glut of unsold homes that is dragging down the country’s economic growth. Chinese leaders have eased taxes and down payment requirements. They are taking new steps to offer mortgages. And they have eased the tough laws that traditionally have kept migrant workers from putting down roots in big cities.

The leaders want to turn people like Hong Qiwen into home buyers. Mr. Hong, 32, runs a small pastry shop in Xi’an, a city in Shaanxi Province in the country’s north. The province has said it will offer mortgages and other help as part of a $9.1 billion lending push to get people — especially migrants — to buy homes.

But Mr. Hong, a father of two young children who is from a rural area in China’s east, represents the challenge to China’s effort. He has no plans to buy one in Xi’an. “I am like a fallen leaf that will eventually return to the roots,” he said, invoking a Chinese proverb.

The housing glut is one of the biggest drags on China’s economy, and therefore one of the major drags on global growth. The empty homes have discouraged further investment in real estate, idling cranes and construction workers around the country.

Investment in Chinese real estate reached nearly $1.5 trillion last year, according to official figures. Economists say the property sector’s impact on the economy is even greater when related industries like steel and furniture-making are included. But growth has come to a standstill. After growing by double-digit percentage rates for more than a decade, Chinese real estate investment last year grew just 1 percent.

Photo
 
Residential buildings for sale in Shijiazhuang, capital of north China’s Hebei Province, last month. Credit Zhu Xudong/Xinhua, via Getty Images

The precise size of the housing glut is unclear. China nationally tracks square meters available for sale. Government data shows that the space in unsold residential units reached a high last year at 452 million square meters, more than twice as much as in 2011 and 130 times the size of Central Park in New York. (A square meter is a little less than 11 square feet.) Unlike typical homes in the United States, which are generally single-family houses, the typical Chinese home is an apartment in a residential complex.

The real housing overcapacity may be more serious than official figures show. “If we take into account the land that hasn’t started construction or newly started projects, the pressure from overcapacity will be greater,” said Yan Yuejin, a property analyst at E-House R&D Institute in Shanghai.

The problem stems from China’s lending-and-spending binge eight years ago to stave off the effects of the global financial crisis. With $611 billion in spending, China rekindled growth but added to its surfeit of steel mills, cement kilns and glass factories — as well as empty homes. The glut was further fueled by Chinese investors looking for a place to park their wealth.

The problem is most acute in China’s less developed cities. Rapid increases in home prices persist in wealthier cities such as Beijing, Shanghai and the southern manufacturing mecca of Shenzhen, and analysts still warn of the potential for bubbles.

For now, Chinese leaders seem mostly preoccupied with the backlog of unsold homes. President Xi Jinping was quoted in November as saying that “destocking the property market” and “promoting the sustained development of the sector” were important tasks for the coming year. Changjiang Daily, an official newspaper in the central city of Wuhan, likened the task of unloading vacant homes to “a battle of annihilation.”

Government ministries have responded with a number of measures, such as reducing the deed tax and lowering requirements for down payments. The pressure is on: One Chinese provincial government has warned county- and city-level officials that they will be “held accountable” if they fail, without specifying the penalties.

Part of the solution, officials believe, lies with China’s hundreds of millions of migrant workers. Many are from the countryside and lack an urban hukou — the household registration that provides access to social services such as subsidized health care and state schools and the right to buy a home. Originally, that system was designed to keep rural workers from flooding Chinese cities.

Now, provincial governments are encouraging the workers to stay, and many are focusing on initiatives tailored to migrants. In the central province of Henan, the government will subsidize city home purchases by migrant workers and give them easier access to an urban hukou. In Wuhu, in Anhui Province, the authorities have promised easy commercial bank loans to migrant workers.

The policies are aimed at people like He Yong, 28, a driver from a village in Jilin Province, which borders North Korea and Russia. He hopes someday to get married, settle down in the nearby city of Hunchun — population 250,000 — and set up his own business. The policies to encourage that have not been introduced in his part of the country yet, but he hopes to take advantage of them.

“Here no one wants to marry you and live in the village,” Mr. He said. “We all want to get a place in the city some day. Being a farmer is tiring and doesn’t make much money.”

Still, the effort could prove to be tough. Hu Xingdou, an economics professor at the Beijing Institute of Technology, said rural residents hesitated to move into cities because rural services were improving, and they worried about compensation for their land and a lack of jobs in less developed cities.

Mr. Hong, owner of the pastry shop in Xi’an, currently rents an apartment in Xi’an, but he doesn’t plan to stay. Pollution and traffic make city life unpalatable, he said, adding that he could probably buy a modest home in a small city if he wanted to. Eventually, he said, he will probably settle down back in rural Jiangxi.

“I dreamed about city life when I was young, because many of the villagers who went there bragged about the city, which they said was full of new things,” he said. “But once I began working in cities, I missed home a lot and was not entirely used to the city way of life.”

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