The Relativity of Rationality: Understanding the Housing Market in the People's Republic of China (PRC) as a Pressure Cooker

Following a perceived surge of foreign investment in real estate markets throughout the world, local governments have entertained policies designed to repel purchasers whose buying power may threaten local residents’ ability... [ view full abstract ]

Following a perceived surge of foreign investment in real estate markets throughout the world, local governments have entertained policies designed to repel purchasers whose buying power may threaten local residents’ ability to purchase homes. These policies, such as British Columbia’s foreign buyers tax, seem to presume that foreign investors are attracted to certain cities by favorable, rational market conditions and could thus be deterred by financial penalties. This paper questions that assumption and examines why investors from the People’s Republic of China (PRC) continue to buy houses in foreign markets that are wary of them or even explicitly inhospitable to them. Rather than being “pulled” to foreign housing markets by their preferences, many investors feel they are being “pushed” out by the PRC’s extremely irrational and unpredictable market. To demonstrate how the PRC’s housing market can act as a “pressure cooker” that works to contain, control, and eventually expel investors, I draw on more than 24 months of participant-observation fieldwork conducted in Zhengzhou, the capital of Henan Province. I investigate the psychological and practical impact sudden changes in housing policies and land auction protocols had on my interlocutors and their decisions to invest abroad. In particular, I focus on two different women, both of whom found themselves and a large portion of their capital caught up in the same EB-5 (known locally as touzi yimin) scam in Chicago. After getting their money back, both of them independently decided to immigrate to the USA through investment through the same agent again. The thought process of these two women demonstrates how determined many PRC buyers of foreign real estate are; I argue that the perceived fairness or rationality of foreign markets is relative and that many buyers may not be able to be deterred from buying abroad but instead pushed elsewhere.