People's Daily: People have paid much attention to the recent round of housing market regulation. We have seen a strong resolve and tough measures taken by the central authorities. Home prices in some Chinese cities have started to level off. How much does the home price need to drop for it to be considered as meeting the regulation target? In the face of economic slowdown and pressure of local finances, will this round of regulation measures be abandoned halfway?
Wen Jiabao: Out of a sense of responsibility, I have carefully reviewed the regulation measures we have taken for the housing market since 2003. As a matter of fact, in 2003, we already introduced six measures to regulate the housing market. In 2005, the State Council issued eight measures. In 2006, another six measures were adopted. But why haven't these measures made a difference? People have complained that the more regulation measures, the higher the home price, and that the regulation policy cannot make its way out of Zhongnanhai. I feel deeply distressed by such complaints from the people.
I have recognized that the housing market concerns our fiscal, financial, and land policies. It involves the relationship between central and local governments. It also concerns the interests of financial enterprises and real estate developers. Our regulation efforts have encountered massive resistance.
But why have we seen a glimmer of hope amidst all the difficulties in the past couple of years, and why have our measures in the recent couple of years paid off? It is because, first, we have a very firm resolve. Second, we have put our finger on the crux of the problem, that is, speculative and investment-driven demand, and we have taken targeted measures to address this problem.
My basic view on the housing market is that China is a big country with 1.3 billion people and it is at a stage of rapid industrialization and urbanization. The Chinese people's housing demand is inelastic and this kind of demand is here to stay. To provide adequate housing for all people does not mean that each and every one owns his home. We need to encourage more people to rent houses.
With respect to the development of the housing market in China, I would like to make three observations.
First, we must ensure the long-term, steady and sound growth of the housing sector. If we develop the housing sector blindly, a bubble will emerge and when it bursts, it will not only adversely affect the housing market, but also weigh on the entire Chinese economy.
Second, what do we mean by bringing home prices back to a reasonable level? What we mean is that a reasonable housing price should match people's income and the construction cost, and the profits should be reasonable too. At present, the home price in some places is far from coming back to a reasonable level. Therefore, we must not slacken the regulation efforts. Otherwise, past gains will be lost and there will be chaos in China's housing market. That is not in the interest of long-term, steady and sound growth of the housing sector in our country.
Third, in developing the housing market, we must give play to the fundamental role of the market in allocating resources. That is to say, we will make most of the "hand" of the market, but at the same time, the "hand" of the government is indispensable too, because that can help ensure stability and promote fairness.