Home Front

HONG KONG

Through a great turn of fortune I find myself this week in Southern China, looking at housing and growth in one of the world's great boomtowns. The ticket is an East-West Center Asia Pacific fellowship. It is my first time in Asia, attending the International Media Conference of 200 reporters in the U.S. and Pacific.

I spent some time as a panelist, assigned to explain the housing crisis that has wracked California and the U.S. Our terrible experience in Sacramento drew a lot of interest here - because the Japanese are still digging out from a real estate crash 20 years ago, and China is trying to contain a real estate bubble. I wished the Chinese in the room much luck, because "you don't want to live through what we've lived through."

China is Sacramento in 2003.

Property values rose 11 percent in the past year, said Jing Ulrich, a managing director of JPMorgan in Hong Kong. Ulrich, who helps steers global investments into China, said people are speculating. They're buying second and third houses or apartments, presumably to flip.

"There's a shift in government policy toward real estate, reining in supportive policy toward real estate and trying to contain an asset bubble," she said.

Ulrich said real estate remains the most important industry in China, the one that generates employment, makes money for local government and fulfills the aspirations of a new middle class.

But in the government there's growing criticism of speculators and developers. The government is dictating that investors need up to a 50 percent down payment to buy a second house. They're charged higher interest rates on the other half, too. Banks are instructed NOT to lend to some investors seeking third homes.

And most radical of all, the government is considering American-style property taxes. Just the idea has already cooled the frenzy. Real estate interests are predictably crying foul, according to the Wall Street Journal Asia edition. "Opponents fear new taxes would shatter confidence in the real estate market, leading to a bust that would damage the entire economy," it says.

"Property transactions collapsed in the past few days," said Ulrich.

It's amazing to hear about this from a Sacramento perspective. What if government here had stepped in early? Would it all have turned out differently?

This trip involves a few more days in Hong Kong, then short stays in Singapore and Taiwan. Check back for new posts on similar topics. Wish you were here.