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China Can Endure a 50% Decline in Housing Prices

On November 21, 2011, China Securities Journal published an article under the name of Chen Bingcai from the Chinese Academy of Governance titled, “The Fall of Housing Prices Will Benefit Industrial Restructuring.”

Chen claimed that the decline in the price of housing is a trend that will be helpful to an industrial structural adjustment. He suggested that China can endure a 50% decline in housing prices. First, Chinese banks can still get back the principle on their mortgage loans because housing prices have increased 50% to 80% over the last two years. Second, lower home prices are good for the lower end consumers. Third, a drop in real estate prices will not affect owners who occupy their homes (and therefore intend to keep them).

Source: China Securities Journal, November 21, 2011