China's economic growth over the past few years has been phenomenal. Growth in international trade has created a demand for property that has hitherto been unheard of. Urban centres such as Shanghai and Beijing have witnessed a growth in prices to the point where many local people would now be unable to purchase the homes in which they live.
There is a further dimension to the Chinese property market, which is seldom mentioned in the Western media: all the land in China is state owned and there is no existing law in China permitting, let alone protecting, the acquisition of private land ownership.
The “purchasing” of a property in China does not result in the ownership, either in part or in whole, of the property or the land that the property in question is built upon. Rather, the “purchaser” receives a lease of a certain length (normally around 70 years) for the exclusive (but transferable) right to the usage of the property. The law governing what happens after the present lease expires is still being formulated and is one of the hotly debated issues in the Chinese law community.
Further more, as all lands are state owned, the city or provincial government officials in China possess extraordinary powers when it comes to land usage planning and allocation. This is a country where sections of a city can be arbitrarily demolished and rebuilt with scant consultation (if any) with the people concerned. At the time of writing, the law protecting the property leaseholder in situations where the land it locates on is to be redeveloped is ambiguous at best.
Therefore, after taking into account the fact that the Chinese “property market” consists entirely of the trading of these time limited land leases of uncertain future, the magnitude of their recent boom in price, and the potential size of the housing bubble created as a result, is perhaps beyond comparison to any other country in the world at this time.