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6 White Paper on the Business Environment in China
Regulatory Attempts to Contain Housing Prices conditions.” This was echoed by a spokesman from China’s
In addition to macroeconomic adjustments, increased down Statistics Bureau, who said that” “relevant departments will
closely follow the changes in the property market and improve
payment requirements and the new property tax, the Ministry property macro-control policies accordingly.”38
of Land Resources has added additional regulatory pressure on
developers to assist with the Central Government’s property Possible Expansion of Property Tax Program
price control efforts. According to Housing and Urban-Rural Development
Minister Jiang Weixin, “The Chinese government is ‘actively
A September 2010 release from the Ministry stipulated that, studying’ an expansion of the experimental property tax pro-
among other things, “Chinese property developers and their gram in the country and may expand the program when time is
controlling shareholders will be banned from participating in appropriate.”36The property tax program, begun in 2011 as an
land auctions if they are found guilty of illegal activities,” that attempt to moderate excessive growth in residential real estate
“Developers who have failed to start developing land a year after prices and transaction volume, initially only applied in Chongq-
acquiring a plot at auction would be barred from bidding for ing and Shanghai. The above was echoed in a statement from
additional land until they rectify their irregularities” in order to the State Administration of Taxation in September 2012.39
address the issue of land-hoarding and that local governments However, in an almost about-face, according to a report by
failing to allocate “at least 70 percent of land offered at auction the Official China Securities Journal, China would postpone
to affordable housing, or small and medium-sized apartments” the expansion of the pilot property tax program. 39. According
will be prohibited from selling land for luxury housing.32 to China Daily, while the State Council , in February 2013, had
pledged to strictly implement and improve tightening measures
Tightening Control over Foreign Investment in Real Estate on the housing market in light of faster-than-expected price
Since 2010, several measures have been taken to restrict for- rises in some cities” and that “One of the control directions
it named was the expansion of experimental property tax re-
eign investment in the Mainland’s property markets: forms” and while the Economic Information Daily had stated
On November 4, 2010, the State Administration of Foreign that “Wuhan, Hangzhou and Xiangtan possess the basic pre-
requisites for the launching of such pilots, including a tax eval-
Exchange and the Ministry of Housing and Urban-Rural De- uation system”, the same media report said, “the final expansion
velopment “clarified” a four-year old regulation restricting for- list is still subject to decisions from the State Council and other
eign individuals to the purchase of one residential property only related authorities.” 40
for personal use and foreign-invested enterprises with branches Most recently, in March 2014, The Wall Street Journal states,
or representative offices to one non-residential house for busi- Vice Finance Minister Liu Kun declared that while existing pi-
ness use—and only in the city where the office is registered.33 lots in Shanghai and Chonqqing will continue, there would
be no plans to expand the program to other cities. Instead, the
On November 22, 2010, the Ministry of Commerce fur- focus would be on drafting a new property tax law. The same
ther released its “Circular on Strengthening the Reviews on the media states that Premier Li Keqiang, in his monthly report,
Approval of Foreign Investment into Real Estate Field”, which said that “the government wants to accelerate the introduction
aimed to retain speculative and “round-tripping” investments. of a property tax law.” No timetable, however, was indicated.41
The circular gave provincial authorities the mandate to review
the integrity of the related land-use documents, prohibited for-
eign-invested real estate enterprises from buying or selling prop-
erties that are completed or under construction in the PRC for
arbitrage as well as prohibiting them from entering into prop-
erty development or operations businesses, among attempting
to close several loopholes relating to mergers, acquisitions and
equity exchanges.34
Finally, in April 2011 foreign investment in the construc-
tion and operation of villas was moved from the “restricted” cat-
egory in the Foreign Investment Catalogue to the “prohibited”
one.35
Meantime, as the housing market continues to cool down
with more constrained mortgage availability and tighter
credit, the Chinese government is indicating that different
housing policy regulations could be applied to different types
of cities. Bloomberg reports that in March 2014, Premier Li
Keqiang said that “the government will regulate the housing
market differently in different cities to take into account local
196
Regulatory Attempts to Contain Housing Prices conditions.” This was echoed by a spokesman from China’s
In addition to macroeconomic adjustments, increased down Statistics Bureau, who said that” “relevant departments will
closely follow the changes in the property market and improve
payment requirements and the new property tax, the Ministry property macro-control policies accordingly.”38
of Land Resources has added additional regulatory pressure on
developers to assist with the Central Government’s property Possible Expansion of Property Tax Program
price control efforts. According to Housing and Urban-Rural Development
Minister Jiang Weixin, “The Chinese government is ‘actively
A September 2010 release from the Ministry stipulated that, studying’ an expansion of the experimental property tax pro-
among other things, “Chinese property developers and their gram in the country and may expand the program when time is
controlling shareholders will be banned from participating in appropriate.”36The property tax program, begun in 2011 as an
land auctions if they are found guilty of illegal activities,” that attempt to moderate excessive growth in residential real estate
“Developers who have failed to start developing land a year after prices and transaction volume, initially only applied in Chongq-
acquiring a plot at auction would be barred from bidding for ing and Shanghai. The above was echoed in a statement from
additional land until they rectify their irregularities” in order to the State Administration of Taxation in September 2012.39
address the issue of land-hoarding and that local governments However, in an almost about-face, according to a report by
failing to allocate “at least 70 percent of land offered at auction the Official China Securities Journal, China would postpone
to affordable housing, or small and medium-sized apartments” the expansion of the pilot property tax program. 39. According
will be prohibited from selling land for luxury housing.32 to China Daily, while the State Council , in February 2013, had
pledged to strictly implement and improve tightening measures
Tightening Control over Foreign Investment in Real Estate on the housing market in light of faster-than-expected price
Since 2010, several measures have been taken to restrict for- rises in some cities” and that “One of the control directions
it named was the expansion of experimental property tax re-
eign investment in the Mainland’s property markets: forms” and while the Economic Information Daily had stated
On November 4, 2010, the State Administration of Foreign that “Wuhan, Hangzhou and Xiangtan possess the basic pre-
requisites for the launching of such pilots, including a tax eval-
Exchange and the Ministry of Housing and Urban-Rural De- uation system”, the same media report said, “the final expansion
velopment “clarified” a four-year old regulation restricting for- list is still subject to decisions from the State Council and other
eign individuals to the purchase of one residential property only related authorities.” 40
for personal use and foreign-invested enterprises with branches Most recently, in March 2014, The Wall Street Journal states,
or representative offices to one non-residential house for busi- Vice Finance Minister Liu Kun declared that while existing pi-
ness use—and only in the city where the office is registered.33 lots in Shanghai and Chonqqing will continue, there would
be no plans to expand the program to other cities. Instead, the
On November 22, 2010, the Ministry of Commerce fur- focus would be on drafting a new property tax law. The same
ther released its “Circular on Strengthening the Reviews on the media states that Premier Li Keqiang, in his monthly report,
Approval of Foreign Investment into Real Estate Field”, which said that “the government wants to accelerate the introduction
aimed to retain speculative and “round-tripping” investments. of a property tax law.” No timetable, however, was indicated.41
The circular gave provincial authorities the mandate to review
the integrity of the related land-use documents, prohibited for-
eign-invested real estate enterprises from buying or selling prop-
erties that are completed or under construction in the PRC for
arbitrage as well as prohibiting them from entering into prop-
erty development or operations businesses, among attempting
to close several loopholes relating to mergers, acquisitions and
equity exchanges.34
Finally, in April 2011 foreign investment in the construc-
tion and operation of villas was moved from the “restricted” cat-
egory in the Foreign Investment Catalogue to the “prohibited”
one.35
Meantime, as the housing market continues to cool down
with more constrained mortgage availability and tighter
credit, the Chinese government is indicating that different
housing policy regulations could be applied to different types
of cities. Bloomberg reports that in March 2014, Premier Li
Keqiang said that “the government will regulate the housing
market differently in different cities to take into account local
196
