March 18th, 2013
10:49 AM ET

Why Chinese are rushing to get divorced

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By Global Public Square staff

A curious phenomenon is unfolding in China. Hundreds of couples are rushing to marriage bureaus across the country. Perhaps the first signs of spring are bringing on a sudden impulse for romance?

No, it's the opposite. These couples are filing for divorce. In each case, a husband and wife mutually agrees to quick separation, no arguing, no quibbling over money or assets. How? Why? Well, actually, it was about money and assets. A vast majority of these couples are getting divorced so they can avoid a new Chinese tax.

Beijing recently decided to impose a 20 percent capital gains fee on sales of second homes. So the theory goes, if you have two homes and you get divorced, you can register each home under separate names. Then, if you see one of those homes, you escape the new tax and, then, perhaps you can get remarried. The bizarre exploitation of this loophole tells a larger story.
At an individual level, it shows the importance of housing as an investment in China, but, at the macro level, the story shows how Beijing's new leaders are struggling to deal with some called a property bubble.

On the one hand, prices are soaring in the big cities. In Shanghai, for example, developers say property prices have risen 40 percent in one year. This is because demand has stayed well ahead of supply as more and more people migrate to big cities. On the other hand, second and third tier towns have a different problem. Here, supply exceeds demand. There are too many houses. Look at these pictures of ghost towns in China. You can see building after building, mall after mall, but no people to live in them.

Essentially, China has a two-speed property market. One is booming. The other is languishing. Now, some might say, China may have a property bubble – but it's not a big deal. They don't have the kinds of mortgage and credit cards Americans had in 2007. It was our debt that caused problem. And the Chinese National Government is certainly doing fine. The consumer is doing fine. But there are those who say China actually has a huge, hidden debt problem.

According to Morgan Stanley's Ruchir Sharma, “China's total public and private debt has soared to more than 200 percent of GDP,” the highest level in the developing world.

Sharma points specifically to private debt, a category that includes all kinds of quasi-state borrowers from local governments to state-owned enterprises.

If you look at the rate of increase of private debt, a good historic indicator of financial stress, China's levels are at dangerous highs. They are higher than the peaks experienced by many countries before the entered a crisis; Japan in 1989, the United States in 2007, Spain in 2008.

If China actually faces a credit crisis, it will plummet the whole world into recession. So China needs cut down on its rising debt which means cutting investment, which means an economic slowdown. That, too, has consequences not only for China, but for all the countries that have come to depend on endless Chinese demand.

Beijing's new leaders have a number of problems, but the new proposals announced this month, loopholes and all, do show that they're trying to act. These are leaders who have studied the mistakes by their neighbor Japan, they have examined the credit binges of Europe and America and they've got a good track record at handling their problems.

Let's hope they can manage this one even if it does cause marital stresses and strains in China.

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Topics: China • Economy • GPS Show • What in the World?

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soundoff (19 Responses)
  1. munkiman

    "Then, if you see one of those homes, you escape the new tax and, then, perhaps you can get remarried."

    Perhaps you meant "if you sell"... ?

    March 18, 2013 at 1:06 pm | Reply
    • EVN

      There are a number of other typos throughout the story. Either CNN doesn't have a proof reader or English is not their first language.

      March 20, 2013 at 9:06 am | Reply
    • DDM

      Agree. Then, if you SELL one of those homes . . . .

      April 6, 2013 at 6:00 pm | Reply
  2. j. von hettlingen

    Indeed, many OECD countries have had excessive spending over the last 10 years and their economy is bearing the brunt of credit binges. Whatever tax China's leadership intends to impose to rebalance the budget, the authorities will face less resistance from the population, unlike the Greeks, Italians and Spaniards etc.

    March 19, 2013 at 8:59 am | Reply
  3. johnny

    The Chinese are guilty of copying a time honored western culture.

    March 19, 2013 at 11:42 am | Reply
    • Jorge

      Well yes they have copy for last how many years, but let rolls the clock, few thousand years, Western civilation now has many things that owed to Asia, let talk from Isreal to must estern part, Civilations all have done the same, copy is not new thing, all have done it, including the West.

      Judeo-Christian foundation that inspire the West to change alot of things comes from the East, and so called Greeks the founders of Western civilization, well guest what they are original got many of they ideas from the East. Look long range history please. so make this bigger

      March 19, 2013 at 12:28 pm | Reply
      • 2Bob

        I think you are misintepreting his comment – I think Johnny meant copying the western trend toward divorce.

        March 21, 2013 at 2:32 am |
  4. EVN

    Jorge, are you CNN's proof reader?

    March 20, 2013 at 9:07 am | Reply
  5. Julian

    Groovy grammar, brah

    March 21, 2013 at 3:50 am | Reply
  6. Burstbubble

    The author states that China's leaders are "trying to act ". Well that isn't a good outlook. It would be like trying to pick up a pencil and never actually doing it. That doesn't work!

    March 22, 2013 at 1:32 am | Reply
  7. Rick McDaniel

    In other words.........they are experiencing the wealth taxes of the U.S., the marriage penalty tax, and all the rest of the "great" things our government slams its citizens with.

    March 22, 2013 at 1:01 pm | Reply
  8. hongshan

    Feminism is destroying China. Thanks a lot, white people.

    March 23, 2013 at 3:01 pm | Reply
  9. awaiting moderation

    People are rushing here to not marry at all, unless it is a man ,man or girl, girl marriage. Government makes it plain here, two can live cheaper than one. and also cuts down on the population explosion.

    March 25, 2013 at 12:58 pm | Reply
  10. Bill

    Looks like legalizing g a y marriage in China is having the exact same effects it would if we legalized it here in the US.

    Wait a minute....

    March 29, 2013 at 12:08 pm | Reply
  11. Misha Firer

    I like the morale of the story. It's good that the Chinese government put forward such law, even if there's a rush of couple getting divorced. LIke an increased number of divorces is a minor side effect to an otherwise laudable policy.

    March 31, 2013 at 2:31 am | Reply

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