Xinhua News Agency has recently published a series of 6 critical articles, strongly criticizing the phenomenon of "land finance" and pointing out that it has created potential risks for the harmonious development of the economy and society.
From an economic perspective, the current land auction system falls under a category of supply monopoly with competitive demand. The coexistence of this monopolistic supply and competitive demand inevitably leads to cutthroat competition among bidders, causing continuous spikes in land prices.
● March 29: "Real Estate Market Should Not Become a Paradise for Speculators"
The health of the real estate market is crucial to the overall economy, and fluctuations in housing prices directly affect public interests. Therefore, real estate regulation must quickly find effective solutions. As the market economy system gradually matures, administrative control alone cannot solve all problems. Taxation measures that conform to market principles and can be flexibly applied should play a larger role.
This morning, Mr. Zhang Jiangaoo, Director of Xinhua's Overseas Department Criticism Office, informed our reporter that immediately after the conclusion of the National People’s Congress and Chinese People's Political Consultative Conference sessions, there was strong feedback from representatives and committee members regarding the rapid increase in housing prices. This prompted them to plan this series of critical reports.
● April 1: "How Long Can 'Land Finance' Last?"
From March 28th to April 2nd, Xinhua published a daily critique starting with "Hidden Worries Behind the Booming Real Estate Market," offering a comprehensive interpretation of the current issues in the real estate sector.
Secondly, Director Zhang told reporters that since moving to Beijing at the beginning of the 1980s, he has lived and worked there for nearly 30 years. He personally feels the rapid rise in Beijing's housing prices, which have far exceeded the rate of economic growth and the income increase of ordinary people, especially in key cities like Beijing, Shanghai, Shenzhen, and Guangzhou.
The critiques pointed out that "land finance" essentially preempts the total land revenue for several future years. Such "preemptive spending" will inevitably impact the rational allocation of resources and harm the harmonious development of local economies.
Currently, most market analysts believe that without increasing the fiscal authority of local governments, the situation of "earning wealth through land" is difficult to resolve by mere "regulation." Property tax is seen as a natural choice to increase local government revenues.
After the publication of Xinhua's series of critiques on the real estate sector, it immediately caused significant reactions online. Major portal sites rushed to reprint the articles. Some netizens speculated in their comments that as a national-level media outlet, launching such heavy-hitting critical reports is relatively rare, suggesting that higher authorities may soon take major actions against the real estate industry.
In 2009, national real estate development investment increased by 16.1% compared to the previous year, and residential property investment increased by 14.2%, both significantly higher than the GDP growth rate of 8.7%. This preemptive land-based fiscal strategy determines that the real estate market cannot sustain itself and means that relying on this method to drive economic growth is not sustainable long-term.
● March 31: "Rising Land Prices Challenge the Auction System"
He informed reporters that first, in recent times, the Ministry of Land and Resources and other departments have introduced a series of measures to curb the rapid rise in housing prices. Especially, the rise in housing prices has drawn high attention from the central government and the State Council, forming a consensus at all levels.
On April 1st, an article titled "How Long Can 'Land Finance' Last?" pointed out that "to solve the problem of 'land finance,' the urgent task is to weaken the incentive for local governments to 'earn wealth through land' from a systemic arrangement." How to stop this incentive? The article suggested "granting more financial support to local governments."
Key opinions from "Xinhua Commentaries"
● April 2: "Tax Levers Should Play a Bigger Role"
Behind the frenzy of land grabbing and rising land and housing prices, one can often see the shadow of some local governments. Treating land sales as a major source of revenue is, to some extent, a short-sighted behavior where everyone gains or loses together. In such a situation, how can we expect local governments to voluntarily control housing prices? This creates hidden risks for the harmonious development of the economy and society.
● March 30: "Resolutely Eliminate the 'Corruption Cost' in Housing Prices"
From direct bribery by officials who then provide convenience to developers, to more covert "power-property transactions," buying properties at low prices and reselling them for profit, and even further hidden practices like using power as "dry shares" to participate in real estate development behind the scenes, real estate developers and corrupt officials spare no effort to avoid legal punishment.
● March 28: "Hidden Worries Behind the Booming Real Estate Market"
There is no denying that in recent years, the speculative nature of China's real estate market has become increasingly prominent: first came the "Wenzhou Property Investment Group," followed by the "Shanxi Property Investment Group" and the "Inner Mongolia Property Investment Group," where those who became rich first engaged in fierce competition for land acquisitions...
Recently, Xinhua continuously published six "Xinhua Commentaries" focusing on housing prices, directly targeting local governments and criticizing the root causes of the current real estate market issues—land finance and corruption-induced high land and housing prices.