NATIONAL NEWS, ECONOMY, OPINION: Economic Adjustment in China
By Ellen Ji
On October 29th, the Central Bank of China announced that interest rates would increase by 0.27%. It was the first time the government raised interest rates in ten years. It is said that the economic sector most directly influenced is real estate. In recent years the price of a house has sky-rocketed, reportedly having increased by 13% from January to September this year.
I think the reason this happened is that many Chinese people are much wealthier than ever before with the development of the economy, so more people have bought or intend to buy their own houses. That resulted in more demand than the market could offer, so the price kept going up, which created a vicious cycle involving more and more people. In this case, the government adjusted the interest rate in the hope of lessening the heat on real estate.
It is reported that with this sudden adjustment by the government, 42.09% of people put off their plans of buying a home. I believe there are two main reasons for them to put off their house-buying plans. One is that with higher interest rates houses cost more, which forces potential buyers to reevaluate their economic ability before making purchases. The other reason is that house prices may decrease. Many Chinese buyers prefer to wait and see if the situation becomes more stable. From this we can see that the government is trying to help the market find a balance between buying and selling.
Meanwhile, commodity prices have increased, but stably, without violent fluctuation. The change has taken place mainly in food, accommodation, tobacco and wine, but most especially in food. According to research, the retail price of grain increased by 28% from January to August compared with the same period last year. Those are the results determined by the rules of the market. It's reported that the total amount of grain production decreased to 86.14 million tons last year, with a great gap of more than 10 million tons compared with the amount in 1998. This led to an imbalance between supply and demand. So price increases were the result of diminished supplies.
However, the increase in food price benefits farmers directly through the market. It's also a method of the government to honor its commitment to protect farmers' interests. It's believed that the adjustment will bring about both short-term and long-term changes. It shows that the government is trying to take measures to adjust the economic situation to some extent, avoiding the tendency of inflation and keeping the economy developing stably.
We'll wait and see how the trend floats.
On October 29th, the Central Bank of China announced that interest rates would increase by 0.27%. It was the first time the government raised interest rates in ten years. It is said that the economic sector most directly influenced is real estate. In recent years the price of a house has sky-rocketed, reportedly having increased by 13% from January to September this year.
I think the reason this happened is that many Chinese people are much wealthier than ever before with the development of the economy, so more people have bought or intend to buy their own houses. That resulted in more demand than the market could offer, so the price kept going up, which created a vicious cycle involving more and more people. In this case, the government adjusted the interest rate in the hope of lessening the heat on real estate.
It is reported that with this sudden adjustment by the government, 42.09% of people put off their plans of buying a home. I believe there are two main reasons for them to put off their house-buying plans. One is that with higher interest rates houses cost more, which forces potential buyers to reevaluate their economic ability before making purchases. The other reason is that house prices may decrease. Many Chinese buyers prefer to wait and see if the situation becomes more stable. From this we can see that the government is trying to help the market find a balance between buying and selling.
Meanwhile, commodity prices have increased, but stably, without violent fluctuation. The change has taken place mainly in food, accommodation, tobacco and wine, but most especially in food. According to research, the retail price of grain increased by 28% from January to August compared with the same period last year. Those are the results determined by the rules of the market. It's reported that the total amount of grain production decreased to 86.14 million tons last year, with a great gap of more than 10 million tons compared with the amount in 1998. This led to an imbalance between supply and demand. So price increases were the result of diminished supplies.
However, the increase in food price benefits farmers directly through the market. It's also a method of the government to honor its commitment to protect farmers' interests. It's believed that the adjustment will bring about both short-term and long-term changes. It shows that the government is trying to take measures to adjust the economic situation to some extent, avoiding the tendency of inflation and keeping the economy developing stably.
We'll wait and see how the trend floats.
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