The State Council, China's cabinet, issued a notice on March 1 announcing that the governmental body will broaden efforts to support property market regulation. The notice is aimed to further implement macro policies on China's property market controls.
Beginning July 2003, the State Council has passed macroeconomic policies to curb property speculation on nine separate occasions. However, these regulations fell short of realizing their goal to reign in the property market. The reason, in my opinion, is that they did not address the fundamental problems of social fairness and justice.
The macroeconomic policy adopted in 2003, for example, recognized the important role of property market in maintaining the country's current level of economic development, but also inadvertently stimulated rapid housing market price increases. Bidding wars for high-end real estate made headlines throughout the country. With the government's regulation policies swaying back and forth, the real estate prices skyrocketed in the following six years. And in 2010 the State Council had to take more rigid control policies nationwide, even including linking local government performance reviews to the management of real estate price controls.
But at this point, real estate had already grown into a pillar industry in major cities throughout the country, and the revenue generated through taxation accounted for 30 percent of local government funding. The implementation of a stricter nationwide property control system would not be in the interest of property developers and local governments, both of which are reluctant to support broader reform efforts.
China's property market not only affects the direction of the country's future economic development, it also plays a critical role that affects the wealth distribution among Chinese people. But resource allocation inequalities on the property market are unable to be solved through existing property market regulations.
A majority of Chinese are unable to profit from land deal transactions in part due to restricted land use rights. Because of the state or collective ownership of land, property developers can acquire land through legal means and accordingly have gained from land value increment. Put simply, property developers have benefited from the sale of state-owned land at the expense of the common person.
Government officials must realize the growing need to build economically affordable houses in the short term, while reforming the existing land transfer system.
There are worries that the new round of macroeconomic policies issued by the central government will stimulate a new price hike. The concern is not without reason. Property market controls must be combined with fair resource allocation and income distribution.
My suggestions are as follows: First, the central authorities should abolish the land reserve system now in place across the country to prohibit local governments from selling land for profit, and respect the land ownership rights of farmers.
Second, China needs a standardized national property tax, targeting those occupants of large areas of commercial and residential buildings.
Third, the central government should speed up studies and researches on resource allocation systems while further improving income distribution. China is a socialist country and should realize social fairness and justice. No organization or individual should be allowed to take advantage of state assets. The Standing Committee of the National People’s Congress should consider a housing law to sort through outstanding legal questions affecting the property market.
The author is the director of the Institute of Clean Governance at Zhongnan University of Economics and Laws.
This post was first published in Chinese and translated by Wang Qian.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.