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Govts use land as gold

(China Daily)
Updated: 2010-03-18 07:48

Local governments are caught in a dilemma over whether to curb housing prices. But their action in most cases has been restricted to words as they continue to make more and more profits from transfers of land-use rights, says an article in Youth Times. Excerpts:

A record price was offered for land at an auction in Beijing on March 15 in contrast to what was suggested at the just concluded NPC and CPPCC sessions. What the public found puzzling is the presence of many large State-owned enterprises (SOEs) as bidders at the auction. If the authorities are really serious about curbing property prices why were so many SOE representatives hiking the land price by bidding for it?

Local governments face a peculiar problem. They stand to lose precious revenue if they help bring down land prices, because a big percentage of their income comes from transfer of land-use rights. And their revenue may increase but the property sector bubble may grow bigger if they continue with their "liberal" policies.

In fact, it is difficult for the governments at the lower levels to replace transfer of land-use rights with another, constant source of income. What complicates matters is that the many officials who run realty business on the side do not want the housing prices to climb down. Besides, officials are reluctant to build subsidized houses for the low-income families because they won't serve their personal needs. Why? Because many government department and SOE officials have access to inexpensive houses.

(China Daily 03/18/2010 page9)