309. Housing price in China is higher than that in America is determined by Chinese culture

8 January 2017

Pursuant to Chinese traditional culture and Confucius-Mencius Culture, there is a saying “bring up sons to support parents in their old age, store up grain against death for a bad year”

Actually, the culture is quite advanced. The sayings like “bring up sons to support parents in their old age” and “the son’s errors should be blamed to his father’s failure to teach” reflect that in ancient times in China, the traditional culture has the function of endowment insurance and compulsory education. Because of such functions, Chinese civilization is able to have a sustainable development.

Being affected by traditional culture like “store up grain against death for a bad year”, Chinese people have held an ideology “save money and accumulate wealth”.

Actually, the aforementioned Chinese culture is totally different from western culture -- “democracy, freedom and human rights”.

For the western culture “democracy, freedom and human rights”, the highest pursuit is that at the moment when he dies, he just runs out of all the money he made in the lifetime. That is he does not waste any that he made and he does not left any to others.

For individuals, such a culture can maximize his interest while for a nation and a society, this is really bad or even the worst. If one runs out of all the money, he does not make any contribution to wealth accumulation of his family, the country, the nation and the society.

Is wealth accumulation is necessary to the family, the country, the nation and the society? What role can the wealth accumulation play?

If one is born in a rich family, he will lead a happier and cozier life than the one who is born in a poor family; apart from the happiness and coziness, the value that he can made and the way how he makes value will be different.

If one is born in a rich family, what he needs to do is to increase the wealth, from million to billion or even more. Therefore, the value he made is the gap between the value he made and the value he inherited.

If one is born in a poor family, it is quite difficult for him to make millions of wealth.

This example reflects what Chinese people are widely talking about -- different starting line. Actually, starting line is also the impact on individual value by family wealth.

Similarly, the more wealth one can inherit from their ancestors, the more benefits will be provided for the country, the nation, the society and the government.

For a government, how to govern the rich and how to govern the poor will be different; the tax income from the rich and the poor will be different too. Of course, the social management will be different.

Why there are so many differences? Because capitals are different, actually, the wealth given by the ancestors to the younger generations is a kind of capital. Normally, increasing the value of the capital is a kind of wealth accumulation, which is also a way to make money. In fact, this is an important way to make money.

Therefore, we can say that for an individual, the country and the family, accumulating wealth and continuing the wealth will play a great role, which are also meaningful and beneficial.

In China, some economists said that the phenomenon that the housing price in large cities in China is higher than that in America is quite abnormal. This is a economic bubble and the bubble needs to be removed. I think they are wrong.

Why do I think so? Because the value of a house has different meanings for Chinese and Americans, the social demands in China and America are also different. This is resulted in by the different cultures in China and western countries. For westerners, they do not need to “store up grain against death for a bad year”, so it is no need for them to accumulate wealth. For Chinese, it is necessary for them to accumulate wealth and continue the wealth.

House can have its value preserved or increased. So buying a house is being used by Chinese people as a tool to manage money and save money.

For example, if one spends several hundred thousand Yuan buying a car. Some years later, the car is damaged and broken, thus its value will be zero.

If one spends several hundred thousand Yuan buying a house. After dozens of years or even hundreds of years, it can still have the use value and economic value. What’s more, there is a great possibility to have its value increased.

In my opinion, if China is able to make its population increase stably, a couple can have 2 or 3 children, the value of house will be always there.

However, if the fertility is low and the aging is getting serious, there will be fewer people needing to buy a house for marriage. If so, the housing price definitely suffers economic bubbles.

For Chinese people who are used to “store up grain against death for a bad year” and “wealth accumulation”, buying a house can play such a role.

But for the westerners who hope they can run out of all the money when he dies, house cannot play such a role. Instead, house will be a kind of burden for them.

This is just like that in China, one crab costs 5-10 Yuan, which is luxury and delicious. But in some western countries, crabs are considered to be toxic, no one wants to eat them and no one buys it. For westerners, crabs are valueless.

So the value of crab is different for Chinese and westerns while the value of a house is also different for Chinese and westerners.

Therefore, we cannot say that the phenomenon that housing price in some cities in China is higher than that in America means an economic bubble.

Normally, different culture will lead to different social demands. Therefore, the value will be different.

Of course, drawing up policies to control and stop the house hype is a good measure. In first-tier cities where the housing price is too high, it is mandatory to control the house hype in order to avoid some risks. However, in the second-tier cities, third-tier cities and fourth-tier cities, house hype shall be allowed in order to make people able to manage their money by buying house, as well as to inherit the wealth.