By early 2011, China had to cool the economy and tackle the — market, Chinese policymakers shelved the reform agenda and rising leverage and speculation. Policymakers also declared a went back to the proven playbook—infrastructure and real shift in China’s growth model to be more consumption-driven. _ estate buildout. China even eased property investment rules for The transition probably turned out to be more complicated _ foreign institutions and individuals. The result was perhaps the than Chinese policymakers may have expected. Unlike the _ biggest housing bubble ever in China’s tier-one cities—prices infrastructure-driven growth model under which the pace of surged over 30% year-over-year by the spring of 2016. It is as if growth could be controlled by adjusting the pipeline of | China was validating the old physiocratic economic theory construction projects, a consumption-driven model would let | which postulated that the wealth of a nation lies in its land the “invisible hand” of self-interested consumers exert more development. influence. In other words, a consumption-driven model would 6, years China has justified its rapid property price increases cede more control to market forces and experience more oy the basis that it is just catching up to global metropolises unpredictability. While variability in realized growth versus such as London, New York, Hong Kong, Tokyo, etc. The latest projection is a fact of life in the rest of the world, Chinese price surge has indeed accomplished that and more. For officials have sought to minimize this uncertainty as the failure example, a run-of-the-mill two-bedroom apartment in Beijing's to hit growth targets could affect confidence. financial district now costs more than $2,000 per square foot. With an estimated homeownership rate around 90% and many Skyrocketing domestic property prices have also distorted families holding multiple apartments as investments, Chinas | many Chinese investors’ views of foreign properties