In an effort to stimulate the economy, the Chinese government began moving home ownership responsibilities from the State to individuals during the 1990's. Home ownership has been increasing fast in China's major cities supported by government subsidized housing funds and housing mortgages. According to government statistics, 73% of Chinese families have now own their recidences.

The Chinese government reported actual growth rates for housing in the range of 20% during 2001. This is down from the 35% estimate and may still be too high. Nevertheless, even conservative numbers suggest there will be growth in housing of about 15% for the next few years. In 2001 alone, $59.4 billion was spent on urban housing, according to Chinese statistics. Although attitudes are changing, price remains a stronger factor than quality or incentives in much of the Chinese market.

Intellectual Property Rights (IPR) violations are a serious concern in the building products market. The market is filled with illegal, locally produced knock-offs which are much cheaper than their technologically advanced foreign counterparts. Hopefully, with WTO, IPR violations in the housing industry will decrease quickly.

Home Ownership Benefits
A substantial tax advantage is available for those Chinese in the high-income bracket who own their own homes. People in this category are a small percentage, but are still comparable in numbers to the entire population of Canada. Some people are buying additional homes just so they can continue receiving the tax benifit.

Home Financing
State issued “employment credits” are making affordable housing a reality. These credits are redeemable as cash suppliments for first time home buyers. In addition, mortgages are becoming more available to the average citizen.

Building Materials
Growth rates for both internal and external building materials are strong. The living space of the average Chinese is expected to grow from only six square meters per urban dweller in 2000 to 12 square meters by 2005. Energy-efficient building materials will especially be needed to maintain these levels of growth. Double-paned windows, efficient heating and cooling systems, insulation and wood products have good prospects.

There is also a large market for interior decoration and furniture products. Most housing in China is sold in shell form. Thus, the responsibility of transforming the shell into a livable space is the homeowners responsibility. Carpeting, flooring, furniture, and fixtures are just some examples of the possible areas U.S. exporters might be able to penetrate the market. There is also a tend toward more compelete units.

U.S. Position in the Market
U.S. firms enjoy an excellent reputation in China, and are viewed as high quality suppliers. According to Chinese statistics, U.S. products still enjoy a substantial percentage of the import market. In most cases however, imported products are significantly more expensive than domestically manufactured alternatives. Current import tariffs plus VAT add an average of 30% to base prices. WTO has improved this situation, though the phase-in period is five years.

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Fast Facts:

• Housing Mortgage terms have been extended to 30 years though down payments are still around 40%.
• China expects to build between 486 million - 549 million square meters of floor space annually in the first 20 years in the 21st century.
• China completed the construction of 19.25 million square meters of commercial housing by April, 2002, up 10.5% over 2001 figures.
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Key Contacts

Ministry of Construction
Tel: (86-10) 6839-4049
Fax: (86-10) 6831-3669
Website: http://www.cin.gov.cn

Association of Building Materials Industries
Tel: (86-10) 6831-1144
Fax: (86-10) 6831-2191

U.S. Commercial Service Contact Information in China

Beijing Office:
Tel: (86-10)8529-6655
Fax: (86-10)8529-6558/9
Xie Pingping

Shanghai Office:
Tel: (86-21)6279-7930
Fax: (86-21)6279-7639
Scott Yao

Guangzhou Office:
Tel: (86-20)8667-4011
Fax: (86-20)8666-6409
Cathy Wang

Chengdu Office:
Tel: (86-28)8558-3992
Fax: (86-28)8558-3991
Rose Nickle

Shenyang Office:
Tel: (86-24)2322-1198x8142
Fax: (86-24)2322-2206
Liu Yang