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| Aaron Vance Class of 2017 |
Attending Dr. Richard Dilworth’s lecture on the impact of Chinese urbanization last week, I was fascinated by the effect of urbanization on China’s trajectory. Specifically, the movement of Chinese people establishes a foretelling and interesting future for the nation and its potentially forthcoming economic woes.
With China’s explicit urbanization policy pushing it’s people into cities on the Eastern Coast, a density trend has developed pushing wealth to the East and away from the more autonomous and more sparsely populated regions in the West. And while this provides for an interesting case study to unpack the economic impacts of such densities coupled with China’s own form of Federalism, the much more critical impact of this policy will effect the nations economics.
Such a policy of urbanization has resulted in the creation of planned cities, many of which now stand empty. With such a flooded real estate market, one sector has become a critical mass of debt. Coupled with China’s market policies the future of the Chinese currencies strength is sure to be one marred with many hits. As this private and public debt come under control the only panacea for both will be time, a point Dilworth contends and one that I much agree with. With 225% of GDP being debt, the strength of Chinese economy is sure to come under stringent scrutiny in the coming year as many of the other basket currencies continue to gain strength post-Great Recession.
Given the effects of this explicit urbanization policy much of the world will be interested to see what kind of market effects will result. With 49 million vacant units sitting empty in within China, the fear of a new housing bubble bursting, this time to a different magnitude are sure to garner the attention of economists world wide, just as it has my own.
Aaron Vance is a junior McConnell Scholar at the University of Louisville. He studies political science.