THE SIZE OF HOUSING SUBSIDIES IN CHINA*

Yukun Wang

Review of Urban & Regional Development Studies, 1991, vol. 3, issue 1, 103-116

Abstract: Inexhaustible, strong demand for housing, which is generated from the current low rents and the work†unit†distribution housing system, has caused permanent housing shortages in China's urban sector. It is also one of the main sources of China's cost†push inflation. The transition from public to private saving, which is included in current housing reform, is the only way to solve the housing problems facing the country. Calculation of the size of housing subsidies is the very foundation of any housing reform program. Based on my estimates, the annual housing subsidy per woker expanded 8.6 limes during the period from 1978 to 1988, increasing at an anual rate of 24.1%. Total housing subsidies expanded 12.4 times, rising at an annual rate of 28.6%. Relative to GNP, the housing subsidies grew from 1.3% to 4.2% during the period. The rapid expansion of housing subsidies has several significant policy implications for China's economy. These include the need for reappraising real worker income identifying the enlarged portion of revenue in kind, and recalculating housing consumption.

Date: 1991
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