2022-10-17-IMF-IMF-三线城市的故事（英）_58页_2mb

IMF Working Paper Summary: "A Tale of Tier 3 Cities"

Author: Kenneth Rogoff and Yuanchen Yang
Date: September 2022

I. Introduction

• The study examines housing stock, construction rates, and price developments across Chinese cities classified into three tiers (Tier-1: megacities, Tier-2: large cities, Tier-3: smaller cities).
• Real estate accounts for about 24-26% of China's GDP due to high investment, leading to potential overbuilding.
• Imbalances are more pronounced in Tier-3 cities, which have high construction activity but lower population growth.

II. Housing Sector by Tier

1. Tier Classifications:

   • Tier-1: Beijing, Shanghai, Guangzhou, Shenzhen (4 cities).
   • Tier-2: 31 other large cities (including Chongqing).
   • Tier-3: All other cities, accounting for 60% of GDP.

2. Housing Stock:

   • Total housing stock reached 56 billion square meters in 2021.
   • Tier-3 cities house 78% of the stock, while Tier-1 and Tier-2 account for 4% and 18%, respectively.

3. Housing Prices:

   • National average prices rose modestly in Tier-1 cities but dropped significantly in Tier-3 cities (20% in 2021-2022).
   • Pre-owned homes in Tier-3 cities saw steeper declines.

III. Vulnerabilities in Tier-3 Cities

1. Population Decline:

   • Tier-3 cities face population outflows (e.g., 2% decline in 2021) and aging.
   • Demand is expected to shrink by about 3% annually by 2035.

2. Unfinished Construction:

   • High backlogs (e.g., housing under construction in Tier-3 is 10.6x annual completions).
   • Linked to financing issues for developers.

3. Debt Accumulation:

   • Construction sector debt is ~60% higher among Tier-3 firms.
   • Despite government efforts, debt remains unsustainable.

4. Economic Impact:

   • Local governments rely heavily on land sales (43% of revenue in Tier-3 cities).
   • The sector employs 85% of construction workers, indicating a large labor market dependency.

IV. Infrastructure and Risks

1. Disproportionate Investment:

   • Tier-3 cities receive ~88% of road investments but account for 60% of GDP.
   • Similar patterns in other infrastructure (e.g., high-speed rail).

2. High-Speed Rail:

   • 92% of new road projects are in Tier-3 cities, but utilization is low.
   • Major financial losses due to high debt and low ridership.

3. COVID-19 Response:

   • New infrastructure investments aim to stimulate growth but face diminishing returns.
   • Environmental constraints may restrict new projects due to carbon targets.

V. Conclusion

• Tier-3 cities are experiencing a demand-supply mismatch in real estate due to decelerating population and fall in demand.
• Without adjustments, overbuilding and high debt could lead to a challenging economic adjustment, impacting employment and fiscal sustainability.

Key Recommendations:

• Prioritize sustainable development and replace overbuilding with renovation efforts for existing stock.
• Reduce reliance on land sales and diversify local government financing.