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'Man-eater' mine moguls inflate
China real estate
By Florence
Chan
HONG
KONG - Two of the highest items on the
Chinese government's agenda are mine safety and
gradually deflating the real-estate bubble in
Chinese cities. But it has become apparent that
the two problems are related. In the past two
months, spiraling coal prices have brought a
massive windfall to the owners of Chinese coal
mines, many of which are operated with an
appalling disregard for the safety of the miners.
And many of the mine owners have disposed of their
ill-gotten gains by jumping on the
property-speculation bandwagon, an action directly
contrary to the government's stated intention to
cool overheated real-estate prices.
Since
last month, the real-estate buying sentiment of
the general public has weakened as buyers wait to
see what impact official macro-control measures
will have on the market. But coal-mine owners have
been an increasingly noticeable exception to this
trend. Mine owners are flocking from
mineral-strewn Shanxi province, Inner Mongolia and
northeastern China to speculate in the Beijing
real-estate market. Beijing Business Today has
reported that house buyers from Shanxi, driving
limousines and paying for properties in cash, have
become the favorite clients of upscale realtors.
This is not surprising, given the profit
potential that coal mines offer in a period of
high energy prices. One study showed that an
average mine owner earns a seven-digit yuan income
(equivalent to more than US$120,000) in less than
a year - a vast sum in a country where the per
capita annual income is still only $1,400.
According to statistics released by the Beijing
Real Estate Information Website (www.e-fdc.com),
in the first six months of 2004, some 23% of all
properties and more than 30% of housing properties
in Beijing were sold to buyers from other parts of
the country, and about 40% of buyers were from the
coal-mining region of Shanxi province in central
China. One industry insider even noted that Shanxi
coal-pit moguls now occupy one of every 10 upscale
mansions in Beijing.
In recent years,
rocketing housing prices, buoyed by speculation,
have increased fears that the real-estate bubble
may be ready to pop. In Shanghai, property prices
in such desirable areas as the waterfront and
former foreign settlements have soared to 30,000
yuan (about $3,600) per square meter. Starting in
early March, Beijing introduced a package of
macro-control measures to deflate exorbitant
prices. The package, which aims to discourage
speculation, includes a hike in the mortgage
interest rate, an increase in mandatory
first-installment payments, and a new tax on the
resale of a property within 12 months of the
previous sale (to discourage the rapid "flipping"
of properties). As a result, real-estate-related
stocks generally lost value last month, and the
macro-control panic has knocked some sense into
overexcited speculators and other buyers.
Safe mineral production is the other side
of the dual conundrum faced by the government. As
Asia Times Online reported on March 3 (China's man-eater mines),
according to a survey by the State Administration
of Production Safety, China produced 1.728 billion
tons of coal in 2003. But only 2,090 mines - with
a total annual output of 1.1 billion tons - were
registered as following safety standards as of the
end of 2003. Thus, even by official reckoning, the
balance of coal production - 628 million tons -
was, in effect, secured at the cost of human
lives.
Chinese colliers work in the
world's deadliest mines, constantly aware of the
industry's staggering death toll. On February 14,
an explosion in the Sunjiawan coal mine in
Liaoning province, in China's northeast, killed
214 miners; on March 14, a blast in neighboring
Heilongjiang province claimed 18 lives; a week
later, another explosion in Shanxi province took
72 lives. The Sunjiawan tragedy was ostensibly the
deadliest reported by the Chinese government since
the Chinese Communist Party took power in 1949.
But before the late 1990s, when the government
began to release statistics regularly on mining
deaths, many industrial accidents were never
disclosed.
In actuality, Chinese mines
caused 6,000 deaths last year in floods,
explosions and fires, accounting for a
jaw-dropping 80% of all coal-mining deaths
worldwide - a severe embarrassment for a
government that has always claimed to represent
the working class. Although the toll was 8% lower
than in 2003, by the government's own admission,
China's fatality rate per ton of coal mined is
still 100 times as great as that of the United
States.
Notorious for its man-eating
mines, the government is trying to redeem its
reputation by using the only methods it knows:
bureaucratic crackdowns and the hoary old Leninist
technique of launching "rectification campaigns".
In the wake of the Sunjiawan disaster, Premier Wen
Jiabao declared in a State Council meeting that
the State Administration of Work Safety, a
vice-ministerial bureau, had been upgraded to
ministerial status, and the State Administration
of Coal Mine Safety would be affiliated to the new
body, to ensure the execution of related laws. On
April 14, the central government unveiled a set of
41 new regulations on coal-mine equipment, which
will go into effect June 1.
Thanks to
rapid economic growth, China's need for natural
resources keeps increasing, drastically pushing up
coal and iron prices. Despite frequent official
interventions, coal prices rose 8% last year, and
rose even higher on the black market. Iron-ore
prices have soared with an exceptional 71.5%
annual hike. In the present situation of
overwhelming demand pushing against supply
constraints, many mine owners have become wealthy
overnight. Taking advantage of the loopholes in
existing mining-related regulations and
supervisory mechanisms, they have found a shortcut
to rapid wealth.
One market analyst
believes that these rich mine owners can easily
avoid the impact of the government's macro-control
policy package on the overheated real-estate
market. With plentiful cash on hand, they have no
need to turn to domestic banks for mortgages, thus
evading the measures to tighten lending. Even if
the coal magnates wanted to borrow money for
property purchases, Hong Kong-based banks would be
their first choice; besides lower costs, making
installment payments in US dollars or Hong Kong
dollars could offer an extra windfall in the event
that the Chinese yuan appreciates, as many
observers expect. As a result, the government's
tightening package has scared away or harmed the
economic interests of small consumers, but left
the mine owners, and other speculators, untouched.
The property bubble built partly on the
bones of fallen miners shows how the problems
confronting Chinese society have become
intermingled. Vice Premier Huang Ju, the former
Shanghai party boss, now presides over work-safety
issues at the national level. Coincidentally, the
booming metropolis is a critical locus of the
real-estate bubble. Many observers speculate that
Huang will block Beijing's intention to redirect
the real-estate market on to a sustainable track.
The government's prescription for these two
interrelated headaches will demonstrate its
political wisdom - or lack thereof - to the world.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.) |
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