"Last year, 70% of Zhejiang's top 100 private enterprises were involved in the real estate industry, and this year more than 50 of Wenzhou's top 100 enterprises are engaged in real estate." At a special consultation meeting held by the Zhejiang Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC) on November 23rd, Hou Yuqi, standing committee member of the Zhejiang Provincial CPPCC and director of the Historical and Cultural Committee, disclosed these statistics.
Hou Yuqi frankly stated that Zhejiang's housing prices have been rising too rapidly in recent years, leading to huge profits in real estate which has caused a large amount of physical capital to flow into the real estate industry, hindering the stable development of the regional economy.
Behind the abnormally high housing prices, there is no shortage of corrupt officials engaging in rent-seeking activities in the land market and the real estate industry.
According to information obtained from the Zhejiang Provincial Procuratorate, in 2009, 61 cases involving 67 people were investigated within the provincial land system for embezzlement, bribery, dereliction of duty, and infringement crimes. Among them, 35 cases involving 39 people were related to embezzlement and bribery, including seven bureau directors and eight deputy directors. There were also 26 cases involving 28 people related to dereliction of duty and infringement crimes.
"More than 90% of corruption cases in the land system are major cases, with the highest level of officials and the largest amounts of crime being unprecedented," said Ni Jihua, deputy director of the Anti-Graft Bureau of the Zhejiang Provincial Procuratorate. With the rapid rise in housing and land prices, the amount involved in bribery cases in the land system has skyrocketed, especially with new types of bribery methods such as discounted home purchases and investments becoming prominent. The officials involved have extended from the land system to urban construction, housing management, planning, and government officials.
Zhejiang housing prices have risen 3.14 times in nine years.
The inflated housing prices have led to an increased risk of economic bubbles in Zhejiang.
A report titled "Research Report on Housing Issues of Zhejiang Residents" presented at the aforementioned meeting showed that between 2006-2007, the average price of new commercial housing rose by 48%, and between 2008-2009, it increased by another 30%.
The "housing price-income ratio" rose from 6.49 in 2000 to 10.78 in 2009, far exceeding the international average of 6.4. In particular, Wenzhou's data was 5.87 in 2000 and rose to 17 in 2009. The "housing price-income ratio" refers to the ratio of housing prices to the annual income of urban residents.
At the same time, the "housing price-income ratio" shows the characteristic of "the lower the income, the greater the gap": between 2000-2009, the indicator for the lowest-income families rose from 14.38 to 31.03, for low-income families from 10.94 to 20.37, for middle-income families from 6.84 to 13.51, while for the highest-income families, it only increased from 3.35 to 4.43.
Statistics show that the difficulty for 70%-80% of the population to solve their housing problems through purchasing commercial housing is increasing, and this group is expected to expand. This group includes low-income groups who do not qualify for public rental housing but cannot afford affordable housing, as well as middle-income groups who do not meet the eligibility criteria for affordable housing but cannot afford commercial housing.
Behind the excessively high housing prices, it is common for real estate developers to hoard land and properties to gain enormous profits from skyrocketing land and housing prices.
Industry superprofits have led to physical capital flowing into the real estate industry. According to investigations, most listed companies in Zhejiang operate real estate businesses. In 2009, 70% of Zhejiang's top 100 private enterprises were involved in the real estate industry, and in 2010, 50 of Wenzhou's top 100 enterprises were engaged in the real estate industry.
The report states that China's current tax-sharing system, along with local governments' heavy social expenditure burdens and cadre performance orientation, have all led local finances to rely more on land revenue outside of normal fiscal income.
Research shows that in 2000, Zhejiang Province's land transfer fees were roughly equivalent to 34% of local fiscal revenue, and by 2007, it had reached as high as 101.82%. Meanwhile, real estate taxes are also a significant part of local government fiscal revenue. From January to May 2010, the province's real estate industry taxes increased by 114.91% year-on-year, accounting for 26.96% of total taxes, contributing 59.48% to new tax revenue. In multiple counties and cities, direct real estate taxes account for more than 30% of local fiscal revenue.
In one year, 67 "land lords" were taken down.
According to information obtained from the Zhejiang Provincial Procuratorate, in 2009, 61 cases involving 67 people were investigated within the provincial land system for embezzlement, bribery, dereliction of duty, and infringement crimes. Among those investigated, there were local key leaders.
On December 18th, 2009, Huang Anbo, the former county magistrate of Pingyang, was sentenced to 11 years and six months in prison in the first trial. During his tenure as the deputy secretary of the Pingyang County Party Committee, discipline inspection commission secretary, and county magistrate, he abused his power for others in matters such as pre-arranging new factory site plots and real estate project design changes. Previously, Xu Dingjin, the original executive vice-county magistrate of the county, was sentenced to 12 years and six months in prison in the first trial for bribery and abuse of power.
Following the sentencing of Chen Jing, the former deputy manager of the early stage department of Hangzhou Urban Investment Construction Co., Ltd., and Wu Shaowen, the former deputy director of the Xihu District Construction Bureau, due to bribery related to the Xixi Wetland project, on December 22nd, 2009, Xu Maisong, the former vice mayor of Hangzhou, was officially transferred to the Zhejiang Provincial People's Procuratorate due to involvement in the case. It is reported that Xu's involved amount may exceed 100 million yuan.
"Collusion between officials and businessmen results in the balance of interests in the real estate market tilting towards developers, and ordinary people's pockets have to pay double for corruption and superprofits," said Ni Jihua, deputy director of the Anti-Graft Bureau of the Zhejiang Provincial Procuratorate. In 2003, the Zhejiang procuratorial organs investigated and prosecuted 43 cases involving 43 people for embezzlement and bribery within the land system, among whom 10 were county-level bureau directors or deputy directors. In 2009, in three out of the eleven municipal land bureaus in the province, the "top leaders" were taken down.
According to information released by the Zhejiang Provincial Commission for Discipline Inspection, from 2006 to the end of June this year, the province investigated and concluded 6,612 commercial bribery cases, with a total involved amount of 1.049 billion yuan. They dealt with 547 county-level cadres and 42 hall-level officials. Among these, 2,025 cases were related to the land and infrastructure sectors, accounting for 30.6% of all cases; the involved amount was 265 million yuan, accounting for 25.2% of the total involved amount; and 2,342 people were involved, accounting for 39.1% of the total number of people involved.
"Real estate sector corruption cases occur frequently, and land-related petition cases have exceeded 50%," according to statistics by Hou Yuqi, standing committee member of the Zhejiang Provincial CPPCC and director of the Historical and Cultural Committee. In 2007, out of 39,747 petitions received by the Zhejiang Land Resources System, 22,157 were related to illegal land occupation, accounting for 55.7%; and 5,659 were related to land requisition disputes, accounting for 14.2%. Some corruption cases involving leading cadres in Zhejiang were to varying degrees related to real estate development.
Currently, China has laws and regulations such as the "Urban Real Estate Law" and the "Land Management Law", but the legal system construction in the real estate sector still lags behind market development, especially in terms of industry access, land supply and use, housing construction standards and quality, fund sources and supervision, housing transactions and rentals, lacking more systematic and detailed legal definitions and institutional norms.
Chen Xianfeng, chief representative of Core House Network Hangzhou, believes that currently, it is necessary to strengthen the supervision of powers related to the real estate market, establish a correct and scientific housing price coordinate system, cost disclosure, and profit review mechanism, use a sound supervision system to strictly examine real estate prices, and reduce the space for criminal activities.