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A Tale of Tier 3 Cities

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  • Kenneth S. Rogoff
  • Yuanchen Yang

Abstract

This paper provides new estimates of the housing stock, construction rates and price developments by city tier in China in order to understand where excess supply might be concentrated, and the implications of any significant contraction. We also update estimates of the size of China’s rapidly evolving real estate sector through 2021, allowing one to look at the initial impact of COVID-19, as well as extending the analysis to incorporate urban-expansion related infrastructure construction. We argue that China overall faces imbalances between supply and demand for housing stock, but the problem is significantly deeper in the generally smaller and lower income tier 3 cities, which nevertheless account for more than 60% of both China’s GDP and its housing stock.

Suggested Citation

  • Kenneth S. Rogoff & Yuanchen Yang, 2022. "A Tale of Tier 3 Cities," NBER Working Papers 30519, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30519
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    References listed on IDEAS

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    1. Hanming Fang & Quanlin Gu & Wei Xiong & Li-An Zhou, 2016. "Demystifying the Chinese Housing Boom," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 105-166.
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    5. Sun, Xiangdong & Yuan, Ouyang & Xu, Zhao & Yin, Yanhui & Liu, Qian & Wu, Ling, 2021. "Did Zipf's Law hold for Chinese cities and why? Evidence from multi-source data," Land Use Policy, Elsevier, vol. 106(C).
    6. Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 739-767.
    7. Kenneth Rogoff & Yuanchen Yang, 2021. "Has China's Housing Production Peaked?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(1), pages 1-31, January.
    8. Yongming Huang & Jamal Khan & Eric Girardin & Umair Shad, 2021. "The Role of the Real Estate Sector in the Structural Dynamics of the Chinese Economy: An Input–Output Analysis," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(1), pages 61-86, January.
    9. Yuanchen Yang & Yangyang Liu, 2020. "Credit Expansion and Misallocation," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(4), pages 1-5.
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    1. Chartbook #194 Can Beijing halt China’s housing avalanche? The most important economic-policy question for 2023?
      by Adam Tooze in Adam Tooze on 2023-02-05 21:37:56

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    More about this item

    JEL classification:

    • F39 - International Economics - - International Finance - - - Other
    • G01 - Financial Economics - - General - - - Financial Crises
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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