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An Austrian Analysis of China´s Unsustainable Boom

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  • Howden, David
  • XingBin Li, Jason

Abstract

Austrian Business Cycle Theory can shed light on the ways in which the current Chinese economic boom is unsustainable. On the one hand, government interventions, such as land monopolies, have raised costs for real estate developers. By limiting the availability of investment instruments and access to external markets, government interventions have created a strong demand for housing as a hedging tool. On the other hand, a loose monetary policy and artificially low interest rates have made the property market tempting for developers. Over-construction and over-consumption in the housing sector epitomise the capital structure analysis that Austrian economists regard as the core of their business cycle theory.

Suggested Citation

  • Howden, David & XingBin Li, Jason, 2015. "An Austrian Analysis of China´s Unsustainable Boom," MPRA Paper 79791, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79791
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    References listed on IDEAS

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    1. Yiping Huang & Xun Wang, 2011. "Does Financial Repression Inhibit or Facilitate Economic Growth? A Case Study of Chinese Reform Experience," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73, pages 833-855, December.
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    3. David Howden & Yang Zhou, 2014. "China's One-Child Policy: Some Unintended Consequences," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 353-369, October.
    4. Lu, Yunlin & Guo, Haifeng & Kao, Erin H. & Fung, Hung-Gay, 2015. "Shadow banking and firm financing in China," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 40-53.
    5. Gul, Ferdinand A. & Kim, Jeong-Bon & Qiu, Annie A., 2010. "Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: Evidence from China," Journal of Financial Economics, Elsevier, vol. 95(3), pages 425-442, March.
    6. Zhang, Dingsheng & Cheng, Wenli & Ng, Yew-Kwang, 2013. "Increasing returns, land use controls and housing prices in China," Economic Modelling, Elsevier, vol. 31(C), pages 789-795.
    7. Zhang, Chengsi, 2013. "Money, housing, and inflation in China," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 75-87.
    8. Coulson, N. Edward & Tang, Mingzhe, 2013. "Institutional and demographic influences on the presence, scale and geographic scope of individual Chinese real estate investment," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 187-196.
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    Cited by:

    1. Hickey, Gordon M. & Pouliot, Mariève & Smith-Hall, Carsten & Wunder, Sven & Nielsen, Martin R., 2016. "Quantifying the economic contribution of wild food harvests to rural livelihoods: A global-comparative analysis," Food Policy, Elsevier, vol. 62(C), pages 122-132.
    2. Lee, Susan E. & Braithwaite, Peter & Leach, Joanne M. & Rogers, Chris D.F., 2016. "A comparison of energy systems in Birmingham, UK, with Masdar City, an embryonic city in Abu Dhabi Emirate," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 1299-1309.

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    More about this item

    Keywords

    Austrian Business Cycle Theory; capital structure; China; housing bubble;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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