Copyright Page
© 2022 International Monetary Fund
WP/22/196
IMF Working Paper
Western Hemisphere Department
A Tale of Tier 3 Cities Prepared by Kenneth Rogoff and Yuanchen Yang12†
Authorized for distribution by Koshy Mathai September2022
IMF Working Papers describe research in progress by the author(s)and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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 imbalances 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 outside tier 1 cities.
RECOMMENDED CITATION: Rogoff, Kenneth, and Yuanchen Yang. 2022. “A Tale of Tier 3 Cities.” IMF Working Paper2022/196, International Monetary Fund, Washington, DC.
| JEL Classification Numbers: | F39, G01, R3 |
| Keywords: | China, Real Estate, Macro Economy |
| Authors’ E-Mail Address: | krogoff@harvard.edu, yyang6@imf.org |
| JEL Classification Numbers: | F39, G01, R3 |
| Keywords: | China, Real Estate, Macro Economy |
| Authors’ E-Mail Address: | krogoff@harvard.edu, yyang6@imf.org |
Title Page
WORKING PAPERS
A Tale of Tier 3 Cities
Prepared by Kenneth Rogoff and Yuanchen Yang
Contents
I. Introduction
II. The Overall Size of the Housing Sector
III. Real Estate by City Tier
3.1 City Tier Classification
3.2 Estimate of Housing Stock by City Tier
3.3 Housing Prices by City Tier
IV. Housing Sector Vulnerabilities in Tier 3 Cities
4.1 Population Outflows from Tier 3 Cities
4.2 Unfinished Buildings Pervasive in Tier 3 Cities
4.3 Debt Accumulation behind the Construction
4.4 Housing Sector Vital to Economy and Employment
V. Infrastructure Development
5.1 Infrastructure Investment
5.2 The High-Speed Railways
5.3 The New Infrastructure Push in Response to COVID-19
VI. Conclusion
References
Appendix I. Size of China’s Real Estate Activity
Appendix II. Projections of Urban Housing Demand from 2022-35
Appendix III. List of Data Sources
Appendix IV. Additional Figures
FIGURES
1. Housing Stock Estimation
2. Total Housing Stock by City Tier (million square meters)
3. Housing Price Change by City Tier
4. Population Growth by City Tier
5. Housing Under Construction vs. Housing Completed by City Tier
6. Construction vs. Manufacturing Sector Debt Levels
7. Breakdown of Infrastructure Investment
8. High-Speed Railway Passenger Growth vs. Construction Growth Rate
TABLE
1. Real Estate Activity Over GDP (domestic content only)