[Correspondent Diary] Xi Jinping Targets 'Xueqifang' in Effort to Control Housing Prices in District 8

Speculation Targeted Amid Education Fever... 'Bbaengbbaengi System' Introduced for September New Semester
Socialism and Capitalism Clash Over Apartment Prices in China

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Unlike Korea, China has a new school year system starting in September. To enroll in school in September, admission-related documents must be submitted between May and June. Until now, submitting documents such as residence proof to the desired school usually allowed most students to attend their preferred school. However, the situation has changed this year. The Chinese government is introducing a so-called 'bbaengbbaengi (lottery)' system starting in September. It will no longer be possible to attend the desired school based solely on the address.

The sudden change in the admission system by the Chinese government is due to real estate. China also has an equivalent of Seoul’s 8 school districts. Houses (apartments and other residences) located within these school districts are called 'xuequfang (學區房)' in China. Just as housing prices in Seoul’s Gangnam 8 school districts are expensive, xuequfang prices are also high. The buying and rental prices of xuequfang in major cities such as Beijing (Beijing), Shanghai (Shanghai), and Shenzhen (Shenzhen) are outrageously high. You can think of 'Seoul Daechi-dong 8 school districts = xuequfang.' The Chinese government has pointed to xuequfang as a cause of rising housing prices and introduced the bbaengbbaengi system.

Xinhua News Agency analyzed that the imbalance in the allocation of excellent educational resources has caused the xuequfang phenomenon. Although various measures such as establishing branch schools by prestigious schools have been taken over the years, the result has been merely sorting the wheat from the chaff. According to Article 22 of China’s Compulsory Education Law, education administrative departments at the county (縣) level or above are required to promote balanced development of schools, reduce operational gaps between schools, and prohibit distinctions between key and non-key schools. However, in reality, these legal guidelines are not properly implemented. There is also a qualitative difference between teachers at prestigious and non-prestigious schools. Since 2014, China has introduced a rotation system for principals and teachers within compulsory education schools at the county level, but the official media pointed out that this rotation system has not been very effective.

[Image source=EPA Yonhap News]

At the end of last year, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, identified real estate-related loans as a 'gray rhino,' highlighting that Chinese real estate prices are a potential risk factor for the Chinese economy. This has even raised concerns that Chinese financial authorities might change their monetary policy stance. The Chinese leadership’s judgment is that parents’ desire to send their children to good schools, combined with speculative forces riding on this, is driving housing prices sky-high. In fact, on the 30th of last month, xuequfang was mentioned at a meeting of the Communist Party Central Committee Political Bureau attended by Chinese President Xi Jinping. It is very unusual for the word xuequfang to appear in a Politburo meeting attended by President Xi.

After the Chinese government introduced the bbaengbbaengi system, Chinese media began reporting that xuequfang housing prices are plummeting. On the 29th, an article about an apartment called xuequfang in Shenzhen, whose price dropped by 6.62 million yuan (approximately 1.16 billion KRW) compared to early February, became a popular search term.

Whether the Chinese government’s crackdown on real estate will succeed remains to be seen. Some Chinese media also analyze that the decline in xuequfang prices may be temporary. It will be interesting to see whether the market or the Chinese socialist government will prevail regarding real estate prices.