The Ministry of Land and Resources began a campaign yesterday to prevent property developers from "hoarding" plots. But unless the move is backed up by deeper reform of land-use rights, there is no guarantee that the campaign will progress far, says an article in China Business News. Excerpt:

The past few months have seen real estate prices skyrocket, which has not only turned off potential homebuyers, but also encouraged speculators to dip their dirty fingers in the realty pie. Real estate developers seem to have built a vicious circle - of buying land without need, creating supplement shortage and thus driving up prices.

The controversy it has created prompted the Ministry of Land and Resources to accuse developers of speculating in land. The developers, on the other hand, blame rising land prices on lack of supplements.

A document issued by the ministry in 1999 says that if a person or company fails to develop an acquired plot for consecutive two years, the government could unilaterally withdraw the land-use rights. The ministry's latest campaign shows that the policy has not been carried out earnestly.

The problem is rooted in local governments' monopolistic holding of land. After the fiscal and tax reforms in 2003, local governments withdrew the land-use rights they had granted to some enterprises and government institutions. And since then, selling land to property developers has become the main source of their extra-budgetary funds. Though local governments profit by allocating vested land, they never enforce developers to start construction works.

So unless the ministry's campaign is complemented by modifications in the land-use rights, there is no guarantee it will make substantial progress. Deeper reform of land-use rights - including better taxation and fiscal systems, cost transparency and more market players - is the need of the hour.

(China Daily September 3, 2009)