In China, there is a system of grain reserves where the government purchases a certain amount of grains from farmers every year and imports a certain quantity of grains for storage. Rice production in China mainly comes from the northeast and Guangxi regions. Northeastern rice is delicious but has low production and high prices, while Guangxi rice has high production but is not as tasty and has lower prices. Urban dwellers are willing to pay a higher price to buy rice from the northeast. The common practice in various regions is to buy high-quality northeastern rice under the guise of grain reserves at a higher price and sell it in the market to make a profit, while buying the less tasty Guangxi rice at a lower price for grain reserves. The fluctuations in rice prices in the market are significant – high-quality northeastern rice can be sold for 5 yuan per jin, average northeastern rice for around 3 yuan per jin, and lower-quality northeastern rice for 2 yuan per jin. Guangxi rice is generally priced below 2 yuan, and unless very poor, most people are unwilling to eat it. The trade of rice in the market is similar to other commodities – scarce and high-quality rice is expensive, while rice with high production and lower quality is cheaper.
However, unlike rice, houses have different characteristics. Rice is consumed within the year, and if left until the next year, it loses its value. New rice will be harvested the next year. In contrast, once a house is sold, the land it sits on cannot produce another house. The grain reserve system in China helps to stabilize food prices during low production periods, even though the quality of the stored grains may not match those sold in the market. The issue of staple food is highly prioritized by the government. Grain, as a commodity, is separate from land, while houses as commodities cannot be separated from land. This fundamental difference between grain and houses leads to different practices. Hoarding during grain scarcity can lead to severe consequences, while hoarding during times of abundance results in losses. It is important to conduct business without compromising national interests and the basic welfare of the people.
Commercial housing is traded in the market, while affordable housing is designed to ensure the basic housing needs of low-income groups, somewhat similar to the classification of grain as commercial and reserve. However, the separation of property rights and residential rights make it possible to both safeguard people’s basic housing rights and generate substantial profits through the appreciation of property rights. Capital is profit-driven, and in any country or society with a market economy, this principle holds true. Capital flows towards areas where it can profit, hence it moves from the struggling real economy towards the real estate sector. Real estate regulation pushes capital into gold and agricultural product markets, avoiding the real economy. If the real economy provides a conducive environment and profit opportunities, capital would not flow out of it into the real estate market, resulting in a stable upward trend in the real estate sector. However, the system determines the direction of capital flow, not individual will. High taxes, hidden costs, and monopolies create significant wealth gaps and raise living costs, burdening people’s lives. As the burden on the population increases, non-essential goods face overcapacity, leading to closures of enterprises. Meanwhile, the elite accumulate wealth rapidly, causing luxury goods demand to exceed supply. Antiques, calligraphy, jade, luxury cars, and high-end clothing consumption will continue to rise. Only two sectors can accommodate a large amount of capital: agricultural products (to meet people’s basic needs) and commercial housing (to satisfy the elite’s demands). Capital flows need to be guided, not forcefully stopped, and the government understands this principle well.
Given the lightness of the harm caused by both, which field do you think the government will choose to support?
0 Comments