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5 White Paper on the Business Environment in China
70 major cities in their sample saw property price increases slow, prices […] lowered in comparison to the average income.”20
up from only 40 cities in August of the same year.15 By August 2013, authorities’ e orts to cool the market
ere still remains substantial correction to be made, had begun to have some e ect, with real estate investment
however; China Daily reported in late 2011 that “the and sales growth slowing in that month. According to the
unrelenting real estate boom has driven housing prices up National Bureau of Statistics, investment in the sector, “which
by 140 percent nationwide since 2007, and by an eightfold a ects more than 40 other sectors from cement and steel to
increase in Beijing over the past eight years.”16 furniture, rose 19.3 percent in the rst eight months from the
same period a year ago, slower than the 20.5 percent rise in
Although e orts to adjust real estate prices are ongoing, the rst seven months.”21
prices have fallen enough that there were reported at least
Consequently, “China’s biggest property developers
ve street demonstrations in Shanghai since October 2011, [sitting] on $25 billion in cash as they prepare for a possible
with early buyers protesting discounts o ered to later buyers credit crunch and another round of crackdowns on real estate
by, among other things, breaking into sales showrooms and speculation.”22
smashing scale models. Brokers too have su ered, laying o
thousands of workers and closing hundreds of o ces.17 “With land prices hitting record highs and authorities
renewing their push to rein in house prices, the developers’
In the face of this unrest, Premier Wen Jiabao indicated cash hoards may well prove crucial in a sector where margins
that the government would continue its tightening measures.18 are coming under pressure”.22
In July of the following year, Central government “Cash-starved smaller developers are proving tempting
authorities reportedly dispatched 16 inspection teams to targets for some of these cash-rich larger players,” it continues.
major real estate markets around the country “after gauging “According to omson Reuters data, some $14.9 billion in
the scale of the recent property price upturn as a result of mergers and acquisitions have been announced this year,
lax implementation of government policy.”18 In other words, already topping 2012’s entire tally of $14.7 billion.”22
the Beijing authorities best e orts to control property prices
may have been undermined by the very o cials entrusted to In July of 2013 the government “ordered a ve-year
execute on the plans. suspension of the construction of new o cial buildings,” its
latest e ort to “crack down on extravagance and pervasive
e move coincided with “prices in some major cities, corruption.”23
including Shanghai, Guangzhou and Beijing, showing early
sign[s] of a sharp ‘U’ turn.”19 Nevertheless, by December it was reported that the ban
was not being e ectively enforced, leading the government to
Following the inspections, “the central government order “a new crackdown to ensure promises are kept to rein in
[reportedly gave] warnings to some local authorities who were extravagance and pervasive corruption.”24
found not to be following the original guidelines, with the
aim of maximizing revenue from land sales.”19 An e cient, long-term solution to a superheated property
market remains elusive. “China’s soaring house prices reveal
Although by that time “Land authorities [had] already an uncomfortable truth,” observes Reuters. “Government
started to cut land supplies in an e ort to adjust the housing is one of the biggest obstacles to the success of taming the
market, lowering land supply from 172,600 hectares planned market.. State income is so entwined in the need for rising
at the beginning of this year to 159,300 hectares,”19 the land prices that policy e orts to try to curb the house market
Central government is widely seen to be stuck between a rock create an inherent con ict of interest.”25
and a hard place. On one hand there is a clear requirement to
get housing prices under control not only for the disastrous Foreign investment in the property market is growing, as
e ect a real estate bubble popping on the Mainland might well: the State Administration of Foreign Exchange reported
have but also in terms of maintaining social stability as home in 2010 that 23 percent of foreign investment in the PRC
ownership in major cities becomes increasingly out of reach went into the real estate sector.26
for ‘ordinary’ citizens. Meanwhile, authorities are also hesitant
to “counter the e orts of maintaining growth”19—presumably Due to tight restrictions on residential property, most
doubly-so in such proximity to the Communist Party’s once- foreign investors enter into the nation’s commercial property
every-ten-years leadership changeover. market—especially so in rst-tier cities where there are quota
restrictions on foreign investment scale.27
On the whole, the government’s measures to stabilize
residential property prices seem to have succeeded despite their Major foreign investors in the Mainland property market
poor implementation in some localities, with Xinhua reporting are mostly from private equity,27 with large investments being
that “Housing prices have remained at roughly the same level made in development enterprises.28
[since 2010], while average per capita income has increased by
more than 10 percent year-on-year, [indicating] that housing As the Central Government’s tightening e orts have made
it more di cult to secure nancing for developers, they are
178 increasingly turning to private equity to fund their projects.
70 major cities in their sample saw property price increases slow, prices […] lowered in comparison to the average income.”20
up from only 40 cities in August of the same year.15 By August 2013, authorities’ e orts to cool the market
ere still remains substantial correction to be made, had begun to have some e ect, with real estate investment
however; China Daily reported in late 2011 that “the and sales growth slowing in that month. According to the
unrelenting real estate boom has driven housing prices up National Bureau of Statistics, investment in the sector, “which
by 140 percent nationwide since 2007, and by an eightfold a ects more than 40 other sectors from cement and steel to
increase in Beijing over the past eight years.”16 furniture, rose 19.3 percent in the rst eight months from the
same period a year ago, slower than the 20.5 percent rise in
Although e orts to adjust real estate prices are ongoing, the rst seven months.”21
prices have fallen enough that there were reported at least
Consequently, “China’s biggest property developers
ve street demonstrations in Shanghai since October 2011, [sitting] on $25 billion in cash as they prepare for a possible
with early buyers protesting discounts o ered to later buyers credit crunch and another round of crackdowns on real estate
by, among other things, breaking into sales showrooms and speculation.”22
smashing scale models. Brokers too have su ered, laying o
thousands of workers and closing hundreds of o ces.17 “With land prices hitting record highs and authorities
renewing their push to rein in house prices, the developers’
In the face of this unrest, Premier Wen Jiabao indicated cash hoards may well prove crucial in a sector where margins
that the government would continue its tightening measures.18 are coming under pressure”.22
In July of the following year, Central government “Cash-starved smaller developers are proving tempting
authorities reportedly dispatched 16 inspection teams to targets for some of these cash-rich larger players,” it continues.
major real estate markets around the country “after gauging “According to omson Reuters data, some $14.9 billion in
the scale of the recent property price upturn as a result of mergers and acquisitions have been announced this year,
lax implementation of government policy.”18 In other words, already topping 2012’s entire tally of $14.7 billion.”22
the Beijing authorities best e orts to control property prices
may have been undermined by the very o cials entrusted to In July of 2013 the government “ordered a ve-year
execute on the plans. suspension of the construction of new o cial buildings,” its
latest e ort to “crack down on extravagance and pervasive
e move coincided with “prices in some major cities, corruption.”23
including Shanghai, Guangzhou and Beijing, showing early
sign[s] of a sharp ‘U’ turn.”19 Nevertheless, by December it was reported that the ban
was not being e ectively enforced, leading the government to
Following the inspections, “the central government order “a new crackdown to ensure promises are kept to rein in
[reportedly gave] warnings to some local authorities who were extravagance and pervasive corruption.”24
found not to be following the original guidelines, with the
aim of maximizing revenue from land sales.”19 An e cient, long-term solution to a superheated property
market remains elusive. “China’s soaring house prices reveal
Although by that time “Land authorities [had] already an uncomfortable truth,” observes Reuters. “Government
started to cut land supplies in an e ort to adjust the housing is one of the biggest obstacles to the success of taming the
market, lowering land supply from 172,600 hectares planned market.. State income is so entwined in the need for rising
at the beginning of this year to 159,300 hectares,”19 the land prices that policy e orts to try to curb the house market
Central government is widely seen to be stuck between a rock create an inherent con ict of interest.”25
and a hard place. On one hand there is a clear requirement to
get housing prices under control not only for the disastrous Foreign investment in the property market is growing, as
e ect a real estate bubble popping on the Mainland might well: the State Administration of Foreign Exchange reported
have but also in terms of maintaining social stability as home in 2010 that 23 percent of foreign investment in the PRC
ownership in major cities becomes increasingly out of reach went into the real estate sector.26
for ‘ordinary’ citizens. Meanwhile, authorities are also hesitant
to “counter the e orts of maintaining growth”19—presumably Due to tight restrictions on residential property, most
doubly-so in such proximity to the Communist Party’s once- foreign investors enter into the nation’s commercial property
every-ten-years leadership changeover. market—especially so in rst-tier cities where there are quota
restrictions on foreign investment scale.27
On the whole, the government’s measures to stabilize
residential property prices seem to have succeeded despite their Major foreign investors in the Mainland property market
poor implementation in some localities, with Xinhua reporting are mostly from private equity,27 with large investments being
that “Housing prices have remained at roughly the same level made in development enterprises.28
[since 2010], while average per capita income has increased by
more than 10 percent year-on-year, [indicating] that housing As the Central Government’s tightening e orts have made
it more di cult to secure nancing for developers, they are
178 increasingly turning to private equity to fund their projects.
