Members | Sign In
All Forums > News
avatar

China Urbanization and Commodity Demand--What do you think?

posted Aug 09, 2011 15:41:26 by gabe
We wrote our piece "What if The China Housing Bulls Are Right? from the "commodity demand" perspective, because China's pressing shortage of arable land means that in general, cities will build upwards and not outwards to create new housing for migrants. The engineering realities of constructing multi-story residential buildings are similar, regardless of location. Thus, glamourous high-rise apartment buildings on the Bund in Shanghai, dormitories in Guangzhou, or lower-cost apartment towers for new arrivals on the outskirts of Zhengzhou will all likely have similar structural needs and thus need similar amounts of steel, concrete, copper, and coal on a per square meter basis.

Even if they are reluctant to change the hukou system, China's leaders do not want Mumbai or Johannesburg-style shanty towns and will go to great lengths to ensure that new arrivals to the cities have some type of real brick and mortar housing. The Chinese government's plan to spend nearly US$200 billion on constructing affordable housing in 2011, as laid out by the Housing and Urban-Rural Development Ministry in March 2011, reflects a robust leadership-level commitment to making sure new urban arrivals have access to housing.

China's affordable housing plans suggest that Beijing views a supply-side response as a critical component of its housing policy. This could help stimulate additional housing market segmentation in which developers continue serving middle-class home buyers, but also build much more lower-end housing that migrants can afford.

Companies around the world, from Coca Cola, to Nestle, to Tata have made billions of dollars in profits from figuring out how to unlock the potential of lower-income markets that many thought lacked the buying power to be worth considering. We see a real possibility that China's homebuilders will, either by themselves, or in a partnership with the government, follow this route and help create housing that migrants can afford. This would fulfill the needs of China's underhoused and drive additional commodity demand.

We are eager to hear what readers have to say, as this is a fascinating aspect of China's ongoing urban development.

Many thanks,

--Gabe & Andrew
Founders, China SignPost
Login below to reply: