Housing booms may hurt, not heal, local growth

For local policymakers, the pros of a property boom are clear and immediate.

On one hand, higher housing prices facilitate sales of land for real estate development to considerably enrich the local coffers.

On the other hand, local officials can reasonably expect a property boom to invigorate investment and create jobs to help boost local economic growth in the short term.

The cons of an overheated property sector are less obvious and imminent.

There seems always to be some individuals who can raise enough money to buy homes and be happy with the rising value of their new homes. And as long as enterprises can make profits from their alternative investment in the property market, what is the need to worry about their stumbling core business?

But Huawei's complaint should be a wake-up call for local officials about the real and serious damage skyrocketing property prices can do.

Unlike many Chinese manufacturers surviving on razor-thin profits, Huawei can theoretically afford to absorb greater increases in land and human capital costs thanks to the large profits it makes from its technological prowess.

Yet, the fact that this company is shifting manufacturing bases to other cities with much lower land prices and adequate land supply for industrial use should justify the government in Shenzhen giving a second thought to the merits of a property boom, especially in the middle and long run.

Those leaving manufacturing jobs can be crucial to the growth of local middle-income group. If Shenzhen cannot afford to lose such middle-income manufacturing jobs, local officials must do something to protect such jobs. So must policymakers in other Chinese cities, few of which can afford unrealistically expensive houses at the cost of middle-income manufacturing jobs.