Speculation is not the cause of China's hefty house prices and the introduction of a real estate tax in the future is unlikely to suppress the country's rising house prices, according to noted Chinese economist Wu Jinglian.
Wu made the remarks at a forum held in Shanghai by the China Europe International Business School, Shanghai Securities News reported on Monday.
A reform master plan, unveiled on Nov. 15 by the Communist Party of China Central Committee, said China will introduce property tax legislation.
At the moment, there is a big controversy over the timing of the introduction of a real estate tax, Wu said, adding that the master plan aims to levy the tax soon, but the property industry has a different view.
"Some people blame high prices on speculation, and they expect the tax to become a setback for those who buy and sell houses frequently in order to gain profits. In my view, the high prices are not caused by speculation, and levying a real estate tax is unlikely to restrain prices."
Wu said the primary goal of the real estate tax is to achieve social fairness and equality in China, as those who have more wealth need to pay more in taxes.
The other main reason for introducing the real estate tax is to provide another source of financial revenues for local governments in China, he said.
Driven by rapid urbanization and huge demand, China's house prices have spun out of control in recent years and become a major headache for the authorities as more people are priced out of the market.
In October, China's house prices continued to rise. According to data released by the National Bureau of Statistics, of a statistical pool of 70 major Chinese cities, 65 saw month-on-month rises in new home prices in October, and 62 reported price gains in existing and second-hand homes.
In response to growing public complaints, China has tried to rein in prices over the years by creating purchase restrictions and experimenting with property taxes, resulting in short-lived cooling of the market. However, after a while, prices have generally rebounded.