China’s Communism

China’s Communism

I have real problems with Communism in China. They have a poor record concerning human rights and do not have an effective system of representing their workers (which was the initial intent of Communism). The more positive side Free Trade and entrepreneurship is alive and well. We visited China in 2018 and have another trip scheduled for the fall of 2020. The tours are very inexpensive, and we surmise that the Chinese Government partially subsidizes them. There were a half dozen venues that were required that were shipping opportunities. What surprised me was that only one of them (The Jade Shop) was government-owned. All of the others were privately owned. All of these businesses provided very professional marketing presentations.

All of our accommodations were in four and five-star hotels that would rival any other hotels we have experienced. Without exception, all of them provided phenomenal breakfasts. As you would expect, most of its infrastructure is very new. I asked our tour guide how all of the improvements were funded. He reminded me that the government owns all of the lands, and they are everyone’s landlord. Beijing typically offers 70-year residential leases and 50-year commercial leases. Our guide further stated that the government had collected over $30 trillion US in lease income over the last 20 years and that currently, they were taking in over 2 trillion annually. The total Chinese National Debt is just under $5.5 trillion US. Their annual GDP is in the $11 trillion US range, and that calculates to a debt to GDP ratio of approximately 50%. By comparison, the current US debt is $24.9 trillion, and the current annual GDP is $21.4 trillion. This equates to a debt to GDP ratio of 117%. Keep in mind that the Chinese Government only owns the land; most of the commercial development and many of the residential improvements are privately owned. The government is communist-controlled, but the economy is more capitalistic and free trade. Their economic system seems to have evolved into a hybrid system. My term for it is “tight rope” capitalism.

Homeownership in China is higher than it is here. In Xiamen, a coastal city with a perpetually hot property market, $300,000 for an apartment is normal — even though the average wage is around $1,000 a month. Even for the city’s middle-class residents, who make between $1,200 and $5,000 per month, the price seems prohibitively high.

However, the people of China can afford to buy these extremely expensive properties. In fact, 90% of families in the country own their homes, giving China one of the highest homeownership rates in the world. What’s more is that 80% of these homes are owned outright, without mortgages or any other leans. On top of this, north of 20% of urban households owns more than one home. So with wages so out of whack with real estate prices, how can so many people afford to buy so many houses? This is all in a country where $5 can get you a bulging armful of food from the local market, and $70 gets you a bunk on a train that’s going all the way across the country. This is a good question that deserves a detailed explanation