Over-reliance on land deals by governments fuels housing crisis
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One issue widely expected to top the agenda of the ongoing National People's Congress is the skyrocketing housing price across the country.
The deputies seem to have little trouble perceiving the urgency of the situation, as evidenced in the number of housing-related proposals.
As Cui Yongyuan, a member of the Chinese People's Political Consultative Conference, said, if the submitted proposals are not relevant enough, or are not addressed adequately after being submitted, the deputies could hardly justify the strict traffic controls imposed for the sake of the congress.
Cui said previous attempts by the State at reining in the housing prices had all failed.
On Sunday afternoon, when deputy Liang Jiyang suggested how to regulate the property market, his talk was the most applauded of the 16 speeches.
He pointed out that the real problem of the property market lies in the monopoly of land and local governments' excessive reliance on revenues from land transfers. Local governments have benefited most from land deals - a fact from which all developers have good reasons to take comfort in.
In Shanghai, for instance, home sales hit five-year low last month, but many property developers know better than to lower the price.
The soaring home prices are also closely watched by economists outside China.
On January 8 when World Bank economist Zeng Xiaodong was invited to talk to a group of Chinese journalists at World Bank headquarters in Washington, DC, a considerable part of the discussion was focused on China's soaring housing prices.
Zeng said the price levels are beyond any imagination, but added that given its vital economic significance, the government cannot but be very cautious in exerting control. Thus, it is very hard to predict the effect of any control.
According to columnist Chen Xu in an article in the Oriental Morning Post yesterday, one of the most important messages from the ongoing congress is the government's economic growth target of 8 percent for this year.
Chen believes there was real consensus from the outside that "it is well nigh impossible to steer the economy out of the recession, while abandoning the expansionary monetary policy and fiscal stimulus in order to curb inflation and assets bubbles."
According to budgetary reports, this year more than 20 percent of the 6.7 trillion yuan (US$1 trillion) in local fiscal income will come from land transfers.
That's why celebrity property developer Pan Shiyi claimed recently that China's property sector had become cancerous, as it is sucking money from all sectors of the economy.
The critical reliance of local government on land deals has frustrated all previous attempts at regulating the runaway market.
Chen Wanzhi, a deputy to the National Peoples Congress from Chongqing, estimated that last year property developers in the country had pocketed at least 1 trillion yuan in profits.
As the soaring housing prices mean soaring income in land transfers, it would be very strange if local governments were not enthusiastic about rising housing prices.
Just a couple of days ago, a vice governor for Hainan Province said in an interview during the congress that there is still room for housing prices to rise in the island.
As land sales can fuel strong growth, local governments are using force to clear land for transfers.
On January 7 this year, in Peizhou, Jiangsu Province, a young villager was stabbed to death when he tried to defend his land from thugs hired by the village head to take his land.
For years Peizhou had achieved dazzling economic growth, and last July was listed as one of the top 100 cities nationwide, sparking a national drive to learn from the "Peizhou Model."
A similar tragedy occurred again on March 3, in Huangpi, Hubei Province, when an elderly woman was killed in a confrontation with people who wanted to tear down her home.
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