Macroeconomic Implications of China Urban Housing Privatization, 1998–1999

This paper presents evidence on the context, magnitude, and probable macroeconomic impacts of the privatization of Chinese urban housing in the 1998–1999 period. Various sources suggest that approximately one half of urban housing stocks were sold by work units to their residents at prices likely between one-fifth and four-fifths of their fair value during the period in question. This transaction significantly increased the wealth of urban Chinese households and improved the cash flows of state-owned enterprises. The case demonstrates the reaction of Chinese economic policymaking to economic stresses, and the capacity of the Chinese state to manage the business cycle.