Private schools are disrupting the Chinese real estate market, frustrating Xi’s egalitarian quest


Officials in an economic slump in central China have come up with a new way to boost the local real estate market: developer-funded schools that have earned a reputation for enrolling their students in the country’s best universities.

Real estate sales in Hengshui, a 4.3m city in Hebei Province, are growing rapidly despite recent attempts by the central government to curb runaway property prices and Chinese progress private education sector.

“I’ve closed more businesses in the last two months than the previous two years combined,” said Li Hongning, a real estate agent in downtown Hengshui. “Clients are willing to pay extra to complete the transaction as soon as possible.”

Xi Jinping’s determination to deliver “common prosperity“In one of the world’s most unequal societies, it will largely depend on the ability of its administration to curb the runaway Chinese real estate market. The Chinese President he also pledged to equalize access to education, after eliminating expensive private teaching services last month.

But the degree to which good schools continue to distort real estate markets across the country suggests that even China’s most powerful leader in recent decades will struggle to overcome market forces and local government interests that stand in the way of his egalitarian goals.

“Beijing may not be happy because of the Hengshui model because it creates a property bubble and exacerbates inequality in education,” said Dan Wang, an economist at Hang Seng Bank in Shanghai. “But local governments want to adopt a practice to strengthen the economy.”

Chinese President Xi Jinping
Chinese President Xi Jinping has often had a weak effect against runaway real estate prices © Leo Ramirez / AFP via Getty

Chinese real estate developers, led by industry leaders like Vanke and Country Garden, have a tradition of building high-quality private schools near housing projects to make the latter more attractive to home buyers.

Bright Scholar Education Holdings from the list of New York, a unit of the Country Garden, has grown into one of the largest national private school networks in the state with more than 57,000 students.

Hengshui is no exception because parents have long been attracted to the city because of the quality of its private schools, most of which were funded by a real estate development company and have gained a reputation for academic excellence.

Average house prices in the city have more than doubled in the last five years, while prices in neighboring cities have risen by only 20 percent over the same period.

Sales growth was triggered by the introduction of government rules restricting school places to children of property owners. This requirement runs counter to central government policies aimed at reducing barriers to education and other social services in urban areas.

“Education in Hengshui is better than elsewhere in Hebei,” said Wang Xiaona, an office worker from Shijiazhuang, the provincial capital. “I have no problem buying an overpriced home as long as it helps my child get into a good school.”

This month, Wang paid 310,000 Rmb ($ 48,000) for a one-bedroom apartment, which will allow her son to enroll in a top-ranked high school owned by one of Hengshui’s largest real estate developers. Before the residence requirement was introduced, the price of the apartment was 280,000 Rmb.

“Our economy is booming with an influx of students, all of whom have benefited from grocery stores to real estate builders,” said government official Hengshui, who asked not to be named.

Xi, however, often had little effect against runaway property prices, saying they were “houses for housing, not for speculation.”

Hengshui first presented plans to expand its overcrowded school system ten years ago, when the then municipal government with no money had no choice but to turn to business owners with deep pockets for funding.

Real estate quickly agreed, betting that well-run private schools would increase local house prices and emerge on their own as profit centers.

“Local governments need to build good schools to strengthen the economy,” said Hengshui’s real estate executive. “They are not able to do it alone. It was a winning result for both us and the local government. ”

Thanks to highly qualified teachers who earn above-average salaries and strict curricula, Hengshui’s private schools are now expelling students who do well in exams. In 2019, the city’s No. 1 high school, owned by a local developer, accounted for 61 of the top 100 entrance exam results for colleges in Hebei.

“Give us the average student and we will give you back a freshman from Peking University,” said official Hengshui No. 1 High, referring to one of the best ranked universities in China.

Hengshui now exports its education-driven growth model across the country. In recent years, Hengshui developers have opened schools in dozens of cities, most of which are also underdeveloped.

Zhang Fuqian, a programmer based in Hengshui and president of Taocheng High School, one of the best in the city, opened a campus with 15,000 students in Binxian, a rural district in the northeastern province of Heilongjiang.

“The [local] The government has said that population and domestic housing prices will decline rapidly if I do not go there and open a good school, ”Zhang said at a conference last month, referring to sluggish housing markets and population outflows in Heilongjiang, as well as near Jilin and Liaoning Provinces.

Zhao Hongchen, the governor of Binxian, said in April that the new Taocheng campus “will largely meet the demand for education and promote economic development.”

Others, like Pan Guilan, a mother from Binxia whose son has not achieved enough success to enter the new school, are more skeptical. Now she worries that her son will stay behind.

“It’s not fair for outsiders to steal our educational resources,” Pan said.

Additional reports by Tom Mitchell in Singapore and Xinning Liu in Beijing

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