Page 240 - 2017 White Paper
P. 240
7 White Paper on the Business Environment in China
lending, and then Beijing’s half-trillion-dollar stimulus discounts offered to later buyers by, among other things,
plan [which] all made funds readily available” (Roberts breaking into sales showrooms and smashing scale
2009). models. Brokers too have suffered, laying off thousands
of workers and closing hundreds of offices (Bradsher
Despite government efforts to contain housing prices, 2011).
the situation has not substantially changed; in February
2011 Reuters noted that “with one-year deposit rates at In the face of this unrest, former Premier Wen Jiabao
2.75 percent and consumer prices seen jumping to an indicated that the government would continue its
annual pace of 5.3 percent in January, inflation-adjusted tightening measures (The Wall Street Journal 2011).
deposit rates are set to fall to negative 2.55 percent”, and
that“raising rates by 350 basis points, the amount needed In July of the following year, central government
to make them clearly positive in real terms, would wreak authorities reportedly dispatched 16 inspection teams
havoc on the economy and possibly fuel social unrest, a to major real estate markets around the country “after
major concern for the ruling Communist Party” (Koh and gauging the scale of the recent property price upturn
Shen 2011). as a result of lax implementation of government policy”
(The Wall Street Journal 2011). In other words, the Beijing
Although experimental property taxes were authority’s best efforts to control property prices may
announced for Chongqing and Shanghai in January have been undermined by the very officials entrusted to
2011, “the taxes, which apply only to new purchases execute on the plans.
of relatively expensive housing, mainly for investment
purposes, are drawing a skeptical response” (Kurtenbach The move coincided with “prices in some major cities,
2011). including Shanghai, Guangzhou and Beijing, showing
early sign[s] of a sharp ‘U’ turn” (Wu 2012).
The upward trend continued, and its effects drove
the State Council to continue to implement tightening Following the inspections, “the Central government
policies on the property market as well as expanding [reportedly gave] warnings to some local authorities who
restrictions on home purchases to second-and-third-tier were found not to be following the original guidelines,
cities (China Briefing 2011b). with the aim of maximizing revenue from land sales” (Wu
2012).
Other measures taken to control the property market
have included “purchase limits, higher down payments, Although by that time “Land authorities [had] already
the introduction of a property tax in some cities and the started to cut land supplies in an effort to adjust the
construction of subsidized housing projects”(Tang 2011). housing market, lowering land supply from 172,600
hectares planned at the beginning of this year to 159,300
These actions have had at least some effect: a National hectares” (Wu 2012), the Central government is widely
Bureau of Statistics report from November 2011 showed seen to be stuck between a rock and a hard place. On
that 59 out of 70 major cities in their sample saw property one hand there is a clear requirement to get housing
price increases slow, up from only 40 cities in August of prices under control not only for the disastrous effect
the same year (Tang 2011). a real estate bubble popping on the Mainland might
have but also in terms of maintaining social stability as
There still remains substantial correction to be made, home ownership in major cities becomes increasingly
however; China Daily reported in late 2011 that “the out of reach for ‘ordinary’ citizens. Meanwhile, authorities
unrelenting real estate boom has driven housing prices are also hesitant to “counter the efforts of maintaining
up by 140 percent nationwide since 2007 and by an growth” (Ibid.)—presumably doubly-so in such proximity
eightfold increase in Beijing over the past eight years” to the Communist Party’s once-every-ten-years
(China Daily 2011). leadership changeover.
Although efforts to adjust real estate prices are On the whole, the government’s measures to stabilize
ongoing, prices have fallen enough that there were residential property prices seem to have succeeded
reported at least five street demonstrations in Shanghai despite their poor implementation in some localities,
since October 2011, with early buyers protesting with Xinhua reporting that “Housing prices have
240
lending, and then Beijing’s half-trillion-dollar stimulus discounts offered to later buyers by, among other things,
plan [which] all made funds readily available” (Roberts breaking into sales showrooms and smashing scale
2009). models. Brokers too have suffered, laying off thousands
of workers and closing hundreds of offices (Bradsher
Despite government efforts to contain housing prices, 2011).
the situation has not substantially changed; in February
2011 Reuters noted that “with one-year deposit rates at In the face of this unrest, former Premier Wen Jiabao
2.75 percent and consumer prices seen jumping to an indicated that the government would continue its
annual pace of 5.3 percent in January, inflation-adjusted tightening measures (The Wall Street Journal 2011).
deposit rates are set to fall to negative 2.55 percent”, and
that“raising rates by 350 basis points, the amount needed In July of the following year, central government
to make them clearly positive in real terms, would wreak authorities reportedly dispatched 16 inspection teams
havoc on the economy and possibly fuel social unrest, a to major real estate markets around the country “after
major concern for the ruling Communist Party” (Koh and gauging the scale of the recent property price upturn
Shen 2011). as a result of lax implementation of government policy”
(The Wall Street Journal 2011). In other words, the Beijing
Although experimental property taxes were authority’s best efforts to control property prices may
announced for Chongqing and Shanghai in January have been undermined by the very officials entrusted to
2011, “the taxes, which apply only to new purchases execute on the plans.
of relatively expensive housing, mainly for investment
purposes, are drawing a skeptical response” (Kurtenbach The move coincided with “prices in some major cities,
2011). including Shanghai, Guangzhou and Beijing, showing
early sign[s] of a sharp ‘U’ turn” (Wu 2012).
The upward trend continued, and its effects drove
the State Council to continue to implement tightening Following the inspections, “the Central government
policies on the property market as well as expanding [reportedly gave] warnings to some local authorities who
restrictions on home purchases to second-and-third-tier were found not to be following the original guidelines,
cities (China Briefing 2011b). with the aim of maximizing revenue from land sales” (Wu
2012).
Other measures taken to control the property market
have included “purchase limits, higher down payments, Although by that time “Land authorities [had] already
the introduction of a property tax in some cities and the started to cut land supplies in an effort to adjust the
construction of subsidized housing projects”(Tang 2011). housing market, lowering land supply from 172,600
hectares planned at the beginning of this year to 159,300
These actions have had at least some effect: a National hectares” (Wu 2012), the Central government is widely
Bureau of Statistics report from November 2011 showed seen to be stuck between a rock and a hard place. On
that 59 out of 70 major cities in their sample saw property one hand there is a clear requirement to get housing
price increases slow, up from only 40 cities in August of prices under control not only for the disastrous effect
the same year (Tang 2011). a real estate bubble popping on the Mainland might
have but also in terms of maintaining social stability as
There still remains substantial correction to be made, home ownership in major cities becomes increasingly
however; China Daily reported in late 2011 that “the out of reach for ‘ordinary’ citizens. Meanwhile, authorities
unrelenting real estate boom has driven housing prices are also hesitant to “counter the efforts of maintaining
up by 140 percent nationwide since 2007 and by an growth” (Ibid.)—presumably doubly-so in such proximity
eightfold increase in Beijing over the past eight years” to the Communist Party’s once-every-ten-years
(China Daily 2011). leadership changeover.
Although efforts to adjust real estate prices are On the whole, the government’s measures to stabilize
ongoing, prices have fallen enough that there were residential property prices seem to have succeeded
reported at least five street demonstrations in Shanghai despite their poor implementation in some localities,
since October 2011, with early buyers protesting with Xinhua reporting that “Housing prices have
240
