Beijing to probe property sector
corruption By Olivia Chung
HONG KONG - The Chinese government has
decided to send investigation teams to the regions
to crack down on irregularities and collusion
between officials and developers in the property
sector, which have been blamed for the failure of
Beijing's belt-tightening policy and tough
measures to cool down the overheating property
market.
Beijing has been launching
macroeconomic controls for the past three years
with the goal of cooling down the property market.
However, property markets in major cities remain
defiant, hitting
new
highs after the central government has toughened
its stance.
The situation has apparently
become unbearable for Beijing. Soaring housing,
education and medical-care costs have been
identified as major sources of growing public
anger, threatening social harmony. In a few
months, the Chinese Communist Party is to hold its
17th National Congress, which is expected to
endorse President Hu Jintao's idea of building a
"harmonious society" as the new party line.
Obviously the government wants to show its
determination to tackle "unharmonious" malpractice
ahead of the all-important party meeting, to win
public support.
The nationwide campaign to
crack down on irregularities in the property
sector will start this month and last until next
March, before the Beijing Summer Olympics. The
announcement of the launch of the campaign came as
the latest statistics showed that housing prices
continued to climb in January despite the
government's reinforced measures to rein in the
sector.
The order to launch the nationwide
investigation was jointly issued by eight
ministries: the National Development and Reform
Commission (NDRC), the Ministry of Construction,
the Ministry of Finance, the Ministry of Land and
Resources, the National Audit Office, the Ministry
of Supervision, the State Administration of
Taxation, and the State Administration for
Industry and Commerce.
The circular issued
by the eight ministries said the nationwide
crackdown was aimed at stopping and preventing
irregularities and collusion between government
officials and property developers in the property
sector to help restore market order. The year-long
campaign will focus on property-development
projects that are under construction and put up
for advance sale.
The ministries will
examine whether local authorities have followed
the proper regulations and procedures in land
sales, the approval of development and
construction plans, the granting of permission for
sales of apartments, and tax collection. They will
also check whether developers had been involved in
illegal advertising, deliberate construction
delays, manipulation of property prices, contract
frauds, tax evasion and forced evictions, the
circular said. "This clearly shows that the
central government is not satisfied with the local
governments' efforts to implement its measures to
bring down property prices, so it has to try
everything possible to achieve its aim of
stabilizing property prices," said Jun Ma, chief
China economist at Deutsche Bank in Hong Kong.
"It is the most important move of the
central government to send special teams to launch
investigations on property projects in the major
cities, which marks its combined efforts to
regulate the market and fight corruption. This
will strengthen the effectiveness of the
belt-tightening measures," he said.
Ma
said he expects that after Beijing's announcement
of the campaign, more local governments, feeling
increased pressure from the central government,
will begin to announce more aggressive measures to
cool down the property market.
Guangzhou
and Shenzhen are two cities that witness
continuous housing-price hikes. It is not
coincidental that both city governments have
announced new measures to cool their markets.
Among other measures, authorities in both of the
Guangdong cities have announced that they will
allocate land to build low-cost housing for
low-income people.
"These measures will
obviously imply increased supply competition and
downward margin pressures on commercial developers
over the medium term," Ma wrote in his research
notes on Monday.
Previous measures
launched by the central government to rein in the
property sector include raising interest rates,
imposing taxes on property transactions, placing
restrictions on new property projects and
restricting foreign investment in property. But
local governments have been accused of failing to
enforce the curbs for fear of hurting local
businesses, and in some cases initiating projects
themselves.
According to the NDRC,
property prices in 70 large and medium-sized
mainland cities climbed 5.6% in January. The
growth rate was 0.2 percentage point higher than
the previous month. The statistics showed prices
in Shenzhen jumped 10.2%, Beijing was up 9.9% and
Guangzhou prices rose 8.9%.
Prices of
second-hand houses jumped by 5.3% in January, with
the growth rate 1.1 percentage points higher than
the previous month.
The Chinese economy
grew by 10.7% to 20.94 trillion yuan (US$2.7
trillion) last year, the fastest growth rate in
more than a decade, but its property development
grew even faster.
Investment in property
development, including apartments, office
buildings and other real-estate projects, a major
engine of the country's economic growth, jumped by
21.8% in 2006, according to the National Bureau of
Statistics.
Olivia Chung is a
senior Asia Times Online reporter.
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