China Power

An Egg-Shaped Problem

Faced with discontent over spiraling real estate prices, how will the government ensure economic growth benefits all?

Following is the first regular entry by The Diplomat's new Beijing-based writer, Mu Chunshan.


There seems to be growing discontent in China. Despite six months of what have been described by some as the most stringent macroeconomic regulation and control policies in history, new figures show real estate prices are still rising. The Consumer Price Index has also reached its highest point in two years, while the prices of some basic foodstuffs like apples have more than doubled.

Of course, pricey apples aren’t a big deal—we can always enjoy oranges instead. But spiraling housing prices is a major issue. This is especially true for Chinese, as owning a home is considered for many to be a prerequisite for a happy family.

Against this backdrop, a 24-year-old from Hunan Province came up with a novel idea—he built a small egg-shaped house in Haidian, one of the most expensive districts in Beijing. Authorities quickly said they planned to destroy it as it was an illegal roadside construction, plans that sparked heated discussions among netizens. The young man said house prices were too high and that he made the house because all he wanted was somewhere to sleep at night (although media reports today suggest the structure has now gone).

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At first glance, it’s an amusing story. But it highlights a sad reality—while the Chinese economy is growing rapidly, many young people are still being left unable to buy or even rent their own place.  Last month, for example, the average house price in Beijing was said to be about 22,300 RMB ($3,350) per square metre—38 percent higher than a year earlier. Average monthly incomes in Beijing, in contrast, are less than 4000 RMB.

The egg house has underscored the need for changes to economic development in China. But it’s not just members of the public who have noticed the hollowness of the ‘achievement’ of overtaking Japan and Germany in terms of size of the economy and total exports, respectively. The People’s Daily and the official Xinhua News Agency have both sharply criticized high real estate prices in recent months, calling for economic development that benefits all citizens.

The Central Economic Work Conference will be held in the middle of this month, at which time officials will set the tone for Chinese economic development over the next five years.

Domestic and international interest (and expectations) is high over what the conference will announce—and how the government will start tackling the high cost of housing and day-to-day goods.