Because the Chinese government doesn’t let households invest in much else, they hold an inordinate amount of their savings in property—more than 66% of family assets were tied up in housing last year, according to Bloomberg.
That’s a puzzling statement. They have a choice of domestic bonds, stocks and “wealth management products”, aka unit trusts. Many have chosen to invest in foreign real estate, bonds and stocks. Real estate is skyrocketing partly because the government owns most of the land available for development and auctions it out very gradually in order to keep raw land prices up, since a lot of government revenue comes from land sales.
Read Pearl S. Buck’s novel “The Good Earth”. It might seem outmoded and of a time before Mao and the PRC but the attitudes about the land ring true even unto today.
The names of the people might change but the types of people stay the same through the generations. And the Chinese peasant valued land over all other things and it brought a continuity down through the generations.
Even though Buck was an outsider, the daughter of an American missionary, I think her book captures a lot that is true about the 20th century Chinese experience, based on what I've read from other sources. As a non-Chinese observer of the Middle Kingdom, I am struck by how, starting in 1979, raw capitalism seems to have risen from the dead and gone from strength to strength, such that it has now surpassed the economies of many of its neighbors to the south that never went through a communist phase (India, Indonesia, Philippines, et al). It is as if central economic planning had not existed in the prior 30-year period (1949-1979) of landlord massacres and cockamamie Maoist economic schemes (village steel mills, pet and bird extermination programs, et al). In the 30-odd years since 1979's economic liberalization, China has gone from the bottom 10 out of about 200 economies in terms of per capita GDP, to the top half of that list. All this on the strength of the animal spirits unleashed by the re-establishment of property rights, the decriminalization of the profit motive and the reform of the labor market that required Chinese workers to fend for themselves in the labor marketplace instead of being assigned jobs by central planners at state-owned enterprises and local collectives.
I suspect for decades hence, they will continue putting their surpluses into land investments, because the availability of leverage means that's a sure bet until the country's growth slows down to a crawl. The only thing that might derail this scenario is political instability. However, I think that possibility is low. Maybe I'm wrong, but I believe that Mao, while still worshiped as the Chinese Messiah, is only worshiped in the way the average Christian worships Jehovah - just as no one thinks adulterers should be stoned or idol worshipers should be killed, the average Chinese worships Mao without subscribing to his economic beliefs.
It's not just Chinese. Any survey of history shows that the most powerful aristocrats and kings were the ones who owned the most land. Britain's richest blue bloods owned vast tracts of land. Owning land requires no creativity, and always throws off some income from rent. It's the ultimate passive investment.