China: Real estate ownership first

Guest article by Elisabeth Tester, Shanghai

Consumption by China‘s rapidly rising middle class is growing and increasingly focuses on higher-value items. But the priority is purchasing an apartment, a goal which dominates consumption patterns.

My Chinese friend Jing is 34 years old. She lives in Shanghai, is married, is expecting a baby and works in the communications department of a large bank. Her 35-year old husband Kang, who also graduated from a good Chinese university, is a computer programmer and works on his own. But he is not really relevant for this report, since Jing – like so many other Chinese wives – makes all the decisions regarding how to spend their money on major consumption and investment items.

Jing owns a few symbols of luxury like a Louis Vuitton handbag, a MacBook Air and a few pricey pieces of clothing. The young couple drives a Chinese hybrid car and enjoys travelling in China and to a nearby foreign destination twice a year. They live in a small but well-equipped 3 bedroom apartment in Songjiang University Town, a nice residential area of Shanghai with many parks, good schools, trendy stores and organic food shops. Even though Songjiang is approx. 70 minutes away from Shanghai’s center by metro, it is a popular residential area for young couples with children.

The need for safety and a lucrative investment

Jing’s life thus does not differ that much from a Swiss citizen’s of similar age – except for the topic of the apartment. The apartment is not burdened by a mortgage anymore, it is paid for entirely with cash. Jing and her husband purchased it without financial support from their parents. How did they manage to do this?

Read the full article on Medium.

Elisabeth Tester, economist and author, former Shanghai-based China correspondent for «Finanz und Wirtschaft». This article was also published on the SNB Iconomix-Blog.