China's "New Currency" Speaks Housing Woe: 1 Pan = 1000RMB/sq m

 

(1 Pan: front)

(1 Pan back)



Chinese real estate guru Pan Shiyi, Chairman of Soho China, released a new "bank note" (above) yesterday with his own image and a tagline "SOHO China is Awesome" replacing "China People's Bank" in the real one RMB note on the front. On the back, 1 Pan note says "Once the idea of war emerges, it needs to be supressed by more powerful thoughts of peace. (One) should use more intense thoughts of friendship and love to diminish hatred."

(real 1 RMB note)

It started with Pan Shiyi, in his microblog posts to commemorate Steve Jobs, proposed that Apple should produce iPhone and iPad that cost less than 1,000 RMB ($157) so that more people could afford these products. Chinese netizens, long been outrageous towards the ultra high home prices, replied by saying Pan should offer apartments priced at 1,000 RMB/sq. meter and that this should be a new measurement. Pan probably took the joke as a good marketing opportunity; indeed he encouraged such discussions and calls for him to release a new 1 Pan currency that stands for 1,000 RMB/ sq. meter. At 11AM today (Oct. 26th), Pan Shiyi officially released the design of 1 Pan on his microblog and asked for feedbacks.

Jokes aside, Beijing's efforts in trying to cool home prices has so far hardly seen significant result. Apart from being a sign of economic growth, the soaring housing price is a result of structurally low real interest rates

(particularly relative to income growth), high saving (and therefore ample liquidity), and a lack of alternative investment and property tax.

To me, the government's control over the banks is a major problem. On the one side is state-owned enterprises that get loans with extremely advantageous terms; on the other side is regular depositors getting about 3% interests (which is a de facto negative return for their savings). I can't see how this imbalance could be solved without a certain degree of liberalization of the banking sector.

In the meantime, I'll relish the all the jokes about the new Pan currency, while lamenting the fact that I probably could never afford to buy a home in my hometown back in China.