A recent Morgan Stanley report points to China’s shift into high value-added manufacturing and services that will boost per capita incomes to $12,900 over the next decade from $8,100 now.
Morgan Stanley predicts that China will join the ranks of South Korea and Poland as a large high income economy in 8 years while acknowledging as legitimate concerns over China’s surging debt levels, slow pace of reforms and the impact of a potential trade dispute with the U.S. The World Bank defines high-income economies as those with a gross national income of at least $12,476 per person.
What drives the growth of China's per capita incomes in the coming decade? Consumption and services in China are increasingly powering growth and proposed structural reforms such as the closure of uncompetitive state-owned enterprises will clear the way for new, high-value added industries in areas such as health care, education and environmental services, according to Morgan Stanley.
JinList™ finds that an additional key driver is the wide spread ownership of real estate assets and continuing increases in the value of such assets in many parts of China. More than 83.4% of Chinese families own real estate and more than 40% own second apartments. A large middle class has been created in a span of 15 years, which is a major accomplishment by the Chinese government, says Dr. Jin Zhao, CEO of JinList.com, the leading digital platform that connects real estate professionals with Chinese buyers.
In 2016, new construction prices in Shanghai, China rose by 32%. Beijing's real estate prices rose even more, reaching an annual increase of 41.8%. The robust real estate price increases indicated the practical end of real estate excess capacity in Beijing and Shanghai. Inland and smaller cities may still need to reduce their existing excess real estate supplies. China's official 2016 GDP reached 6.7%, same as Beijing's GDP. This indicates uneven growth rates in different regions across China, says Dr. Jin Zhao.
Searches by Chinese buyers in China and in the US on JinList.com showed a 366% increase in 2016. Affluent Chinese home buyers and real estate investors are continuing their search for investments in U.S. real estate as they work around government’s capital control restrictions, like through offshore trading companies. JinList™ estimated that Chinese investment in US residential real estate in 2016 would exceed $27.3 billion in 2015 — which surpassed the total dollar sales figure of the next four countries in the rankings combined1. Chinese investments in US real estate have been growing at an annual rate of 54% since 2007 according to JinList.com.
1.The National Association of Realtors, June 2016.