Maverick businessman takes on
property prices By Kent Ewing
HONG KONG - Growing public anger over
steadily increasing housing prices, brought into
relief by the case of Zou Tao, a Shenzhen-based
businessman whose call to boycott housing
purchases has sparked a nationwide controversy,
has forced the Chinese government to take tougher
measures to curb what it regards as an overheating
real-estate sector.
On Monday, nine
ministries of the State Council, including the
Ministry of Construction, the National Development
and Reform Commission, the Ministry of Land and
Resources, the People's Bank of China, the China
Banking Regulatory Commission and the State
Administration of Taxation, jointly announced a
spate of
measures aimed at cooling
down the property market.
The measures
include steps to tighten land supply and bank
lending for the construction and purchase of
luxurious housing, and the levying of punitive
taxes on housing speculation. In an apparent
effort to ease public discontent, the government
will also give incentives in the form of land
supplies and taxation measures to boost the
construction of low-cost housing for
average-income families.
These measures,
to take effect from Thursday, are intended to
implement the State Council's new policy
principles to curb housing prices, unveiled on May
17.
However, the need to take such
measures, which in mature market economies would
be seen as crude interventionism, is evidence that
China's property market, after 15 years of
development, is still far from market-oriented.
A major reason for this is that average
Chinese have yet to accept housing as a commodity,
though of a special kind. They are still used to
thinking that it is the government's
responsibility to provide them with housing. In
any market economy, individuals have to spend a
large proportion of their income on housing. But
the average Chinese citizen is unprepared to
embrace a truly market-oriented property sector.
At the same time, the measures continue a
pattern of recent years in which the Chinese
government has yielded to public pressure out of
fears that public anger would jeopardize social
stability.
Zou Tao case shows property
pressures The case of businessman Zou Tao,
32, has posed a difficult dilemma for the Chinese
government, inasmuch as Zou is an ardent patriot
and admirer of Mao Zedong whose call to boycott
housing purchases has found wide sympathy among
China's underclass and middle class.
When
Zou flew to Beijing recently in an
attempt to meet with Premier Wen Jiabao, his
stated intention was to discuss with the premier
the problem of runaway property prices, which have
put owning a home out of reach for ordinary
people. The current situation in the property
market has increasingly alarmed observers: massive
construction accompanied by soaring prices and a
property vacancy rate calculated by the National
Bureau of Statistics (NBS) to have surged 23.8% to
123 million square meters (of which vacant rate of
residential housing soared 19.7% to 69.83 million
square meters) by the end of March.
Before
his trip to Beijing, Zou - who, like his hero Mao
hails from Hunan province - had
called for a three-year nationwide boycott of
property purchases to flatten demand and bring
prices down. Zou advised potential homeowners to
rent instead of buy. Within days, his open letter
on the Internet had turned into a petition
attracting 30,000 signatures across the country.
While Zou's campaign has been the biggest so far,
widespread demands for lower property prices had
until recently been tolerated by Chinese leaders.
Until the early 1990s, the government
provided housing for most city dwellers, often
through their places of work. In the new, more
capitalistic China, however, families must find
their own homes, which led to the property boom.
Indeed, with few other viable investment
options, the Chinese have poured their money into
property. And a lot of that money has been
borrowed from banks that, weary of lending to the
non-performing government sector, are keen to hand
out cash to homebuyers. The banking and financial
services group UBS reported that, in the years
1998-2003, mortgage and consumer credit
liabilities in China grew from nearly zero to
11.6% of gross domestic product (GDP).
But
latecomers into the market are finding it
difficult, if not impossible, to find something
both suitable and affordable. According to NBS,
housing prices in 70 large and medium cities rose
5.6% year-on-year in April, compared with the 5.4%
figure for March. A recent report by Beijing
Normal University revealed that 70% of those who
live in eastern cities (where prices are the most
daunting) cannot afford to buy a home.
In
some cities, double-digit price rises are the
norm. Zou's own Shenzhen, which is just across the
border from Hong Kong, is among the worst cases,
with price hikes of 35% over the past year. In the
first quarter alone this year, property in Beijing
has risen 15%, and this followed a 19.2% rise for
all of last year.
It seems the problem the
Chinese leadership has with Zou is not so much his
message - after all, the central government is
also wringing its hands over property prices - as
his ability to attract large numbers of
supporters. The government's paranoia about any
group that starts to resemble a movement - from
Falungong to groups of farmers whose land has been
seized to make way for China's rapid economic
growth - is well known.
So it is not
surprising that Zou's message has resonated
throughout the country. Initially, his campaign
was aided by widespread media coverage. But Zou's
trip to Beijing for the announced purpose of
meeting with Wen was apparently perceived as an
act of hubris that needed to be checked.
Naively, perhaps, Zou said he simply
wanted to present to the premier a clear picture
of the public's view of the housing problem. His
aim, he stated, was to become an intermediary
between the government and the people. For that
sentiment, Zou was detained for 10 hours by
Shenzhen police and had his mobile phone
confiscated as he tried to board a plane for
Beijing. But the activist pressed on and
eventually landed in the capital. Once there,
however, he discovered that Wen was not available
and that domestic media had been banned from
covering his trip.
In addition, Zou's
blogs at Tianyablog.com and Bolog.oeeee.com have
disappeared, and the 163.com Internet portal,
which had previously offered regular accounts of
his crusade, is no longer updating his story.
Zou's personal website, however, is still up and
running.
"It is a pity the government has
blocked the campaign and myself," Zou told a
reporter for the Financial Times in Beijing, "but
the more they try to stifle the anger, the more
people will join - we have more than 30,000
members now."
Ever the patriot, Zou
remains upbeat after his unceremonious reception
in Beijing. Although he failed to meet with Wen,
he was not prevented from seeing lesser government
officials, property analysts and developers. He
plans to continue his campaign, which he claims
has already been successful because it has brought
unprecedented attention to the problem.
The key to Zou's appeal is not only his
cause but also his personal background and obvious
sincerity. By all reports, he is mild-mannered and
polite in his dealings with officials and
developers, and he truly believes in social
justice. Hyper-inflated prices, he claims, have
turned ordinary Chinese citizens into "slaves" of
the property market.
Moreover, he charges
- and this is no doubt one big reason he has been
partially muzzled for now - that developers
routinely collude with local governments to keep
prices rising. Although Zou has offered no
concrete evidence for this collusion, it is fair
to say that the allegation rings true for working
people across the country.
Born and raised
in an impoverished village in Longhui county in
Hunan, Zou's personal story is at least as
compelling as his message. When he moved to the
boom town of Shenzhen in 1996, his fortunes began
to change. Using a master of business
administration (MBA) degree and his already
well-honed interpersonal skills, he worked his way
into a lucrative position at a local financial
firm before opening his own business selling golf
equipment.
His rags-to-riches story made
him famous in his Hunan village, and in 1999 that
celebrity brought a group of migrant workers to
seek help from him in recovering unpaid wages from
their employers. At first, Zou tried to convince
officials to intervene in the case, but when his
inquiries went nowhere he advised the workers to
write a letter to the police threatening to kill
their employers and themselves unless they
received their pay.
The desperate ploy
worked, further enhancing Zou's celebrity. These
days he expresses reservations about using such
tactics and says he aspires to a seat in the
Shenzhen People's Congress, where as an insider he
believes he could make more of a difference than
in his current role as maverick businessman.
Whatever Zou's fate turns out to be, it is
probably inevitable that a determined, charismatic
populist found a cause in China's red-hot and
increasingly inequitable property market. There
could be many more like him unless the government
seriously addresses the issues involved.
The State Council, chaired by Wen, tried
to do exactly that with its recent announcement of
six new directives, whose details were fleshed out
just this week in another bulletin from Beijing,
aimed at bringing property prices down. The
problem with the "new" measures, however, is that
they look a great deal like the old ones announced
with equal fanfare a little more than a year ago.
They promise to increase low-cost housing for
ordinary citizens and to use taxation, banking
regulations and land policies to stabilize the
market and penalize developers who hoard land and
artificially inflate prices.
Most
significant, the State Administration of Taxation,
the country's tax regulator, pledged that it is
finally ready to enforce a 12-year-old law that
would curtail rampant real-estate speculation by
imposing a 20% capital-gains tax on property
resold within five years of purchase.
But
the central government's renewed seriousness about
reining in the property market has been greeted
with a healthy dose of skepticism not just by Zou
and his disciples, but also by many analysts in
the property sector. They point out that no matter
what directives are trumpeted in Beijing, it will
be difficult to break through the corrupt bargain
that has been struck between local government
officials and property developers.
The
property boom has contributed mightily to China's
overall 10.2% growth in the first quarter, and
higher and higher land premiums, supplemented by
bigger and bigger bribes, are a popular formula
for local-government officials who want to keep
both their pockets and their government coffers
full while property developers get fat. And since
local officials can only hope to be promoted to
national officials through the stellar economic
performance of their cities and provinces, there
is little incentive to change. There was, however,
a change in Shanghai in the wake of the directives
issued by the State Council: property prices rose
11% in a week. Increasingly, the new China is
becoming a country of laws - good laws - but it is
not yet a country that operates on the rule of
law. Just ask Zou or any of the 30,000 signatories
to his petition.
Kent Ewing is a
teacher and writer at Hong Kong International
School. He can be reached at
kewing@hkis.edu.hk.
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