A 2022 article in Daily Economic News explained that a boom in demand for real estate in county-level towns was driven by reverse migration from big cities to rural hometowns, demand for better quality housing, and villagers commuting from small city apartments to factories or farms in their village. An article about a county town in Anhui Province traced a county real estate boom to a shantytown reconstruction linitiative aunched in 2018, pent-up demand for housing in small towns, and expansion by real estate developers.
According to the Wuhan University essay, it is common for rural parents to put their entire life savings into a down payment for an urban apartment for their adult children who are then committed to monthly payments that are often more than half of their incomes. Many aging parents continue working to help repay the mortgage, just barely making ends meet. Families with multiple jobs and residences were jokingly called "amphibians" swimming back and forth between their village house, their county town apartment, and work sites in big cities.
The Wuhan University authors warned that overextended rural families now face constant risk of financial disaster from job loss, sickness, or other unexpected events. As construction sites go idle, restaurants close, and factories go bust in China's flagging economy, job loss becomes a constant risk that could leave the family short of money to make mortgage payments. As parents reach advanced age, they are at risk of an illness or health crisis that could balloon family expenses and eliminate a parent's income from the family ledger.
While these risks have always been present, the Wuhan University authors say rural families' ability to cope with risks has become increasingly fragile. They report that the younger generation of adult children have become accustomed to a more consumer-oriented lifestyle and often have automobile loans and online debts taken on to finance other purchases or travel as well as the mortgage. With income stretched thin to cover expenses, they have no financial cushion. An unexpected family event or job loss can leave them unable to make payments. Financial disaster could leave a black mark on their credit history, break down the ties of intergenerational cooperation, and disgrace them in the eyes of neighbors and peers.
The rural real estate boom was short-lived. By 2022, Daily Economic News proclaimed a county town"anxiety disorder" for real estate developers as construction of units far outpaced demand and came to a halt as the economy stagnated. Some sales initiatives began to discount down payments or accept payments in pigs, wheat or garlic. Some local government officials were ordered to sell vacant units. A 2024 article said county real estate has no future as local governments and developers expanded construction despite declining county populations. Owners have given up trying to sell county city properties because they won't accept a market price that is just of fraction of what they paid.
The Wuhan University authors say rural family members are in a constant state of anxiety as they worry that financial disaster could happen at any time. They cite a rural resident who panics every month when it's time to withdraw money to make his loan payments. The authors point out that the heavy burden of uncertainty is not conducive to the "light heartedness" that can propel China's drive for "rural revitalization."
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| A social media ad said you could pay for a house with garlic in one Henan county. |
While intergenerational pooling of finances helped families with low incomes buy expensive properties, the Wuhan authors warn that it is unsustainable. They reasoned that housing construction has peaked, since anyone born between 1950 and 1979 who can afford a house has already bought one. These houses will be inherited by their children born in later decades. Younger people would be unable to afford purchase of a home on a monthly salary of about RMB 4000 per month, so there are few new home buyers in the pipeline to propel demand. Hence, real estate will not be a major driver of China's economy in coming years.
In a county town studied in eastern China, the authors walked the streets at night and found all but a few homes were dark. (Daily Economic News reported a similar observation.) They estimated that the buildings already constructed could meet housing needs for the next 10-to-20 years in the town. The authors surmised that the prospects are even worse in county towns of central and western regions.
The Wuhan University authors classify the state of rural families as: upper-income families are complacent; middle income families are falling into a debt trap; and low-income families are "lying flat" and giving up hope of a better life. The authors say lower-class families are "deeply resentful." In interviews, they throw up their hands in despair and complain, "With such high housing prices, low wages and high education costs, we can only live a life of idleness and wait for death."
The authors also characterize the psychology of different generations: those born in the 1960s are "letting go," those born in the 1970s are "struggling," those born in the 1980s are "lying flat," and those born in the 1990s are "increasingly depressed."
The authors say financial catastrophe for rural families could reverberate by triggering loan defaults, exposing county-level banks to financial risks, and regional economic crisis. Nationally, the countryside no longer serves as a "shock absorber" for the economy. During the 2008 global financial crisis, for example, the authors say rural families had enough of a financial cushion that migrants who lost their jobs could move home to the village and take 6 or 8 months to get back into the workforce. Because family finances are so tight, surplus workers can no longer drop out of the labor force, return home to their villages, and wait out an economic downturn.
Besides this article published on a site devoted to rural problems, there seems to be little discussion of the rural family debt issue. A study in a Chinese academic journal earlier this year contained mainly abstract statistical analysis with sanitized discussion that suggested findings similar to the Wuhan University essay's, that rural families with members migrating to work elsewhere are less vulnerable to financial stress, and many rely on borrowing from friends, family and informal lenders to repay rising debts.
The deteriorating financial situation and psychological hopelessness described by the Wuhan University authors nevertheless seem consistent with observations of people sleeping on streets, rural banks halting withdrawals, and random attacks using knives and automobiles by frustrated Chinese citizens. Communist party leaders issued an order this year to prevent recurrence of poverty after having announced that poverty was eliminated once and for all 5 years ago.
The Wuhan authors warn that there is risk of social instability and a "more difficult-to-control situation." Such possibilities can not be mentioned in public since communist party leaders fear such unrest and constantly proclaim that the gap between urban and rural income is narrowing.
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