Presentation by Zhi Liu on Land Municipal Finance & Housing as part of the "Panel on China's Land Management System Reform: Issues, Progress and Prospect" which took place during the annual World Bank Conference on Land and Poverty held in Washington DC from March 23 to 27, 2015.
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Land Policy, Municipal Finance, and Urban Housing Problems in China - Zhi Liu
1. LAND POLICY, MUNICIPAL
FINANCE, AND URBAN HOUSING
PROBLEMS
IN CHINA
Zhi Liu
Lincoln Institute of Land Policy
And
Peking University
Annual World Bank Conference on Land and Poverty
March 25, 2015, Washington D.C.
7. PROBLEMS
Urban housing prices Housing vacancy rate
Local debts
Social tension
Inefficient and Wasteful land use
But a number of economic and social
problems have also emerged…
11. 1978
1994
1998
2004
Economics reform initiated
2008
2013
Tax sharing system established;
Automobile manufacturing sector as one of the
pillars of national economy
Housing reform: moving to the market provision
of housing
Real estate sector as one of the pillars of national
economy
4 trillion RMB stimulus package
The 3rd Plenum of 18th CPC Central Committee
Conference
12. NATIONAL GDP GROWTH TARGET IS PRACTICALLY ACHIEVED BY
ALL LEVELS OF LOCAL GOVERNMENTS TRYING TO ACHIEVE THE
SAME TARGET...
15. GDP Growth Target Set by
Central Government
Local
Government
Employment
Attracting
FDI and other
investment
Public
infrastructure
investment
Real Estate
Development
Local Tax
Revenues
16. City governments respond to incentives under policy
constraints…
1 No tax power
2
Not allowed to
borrow directly
1 Land concessions
2
Borrow through urban
financing platform
3
Boost real estate and
other businesses
constraints solutions
23. WHY HOUSING DEMAND REMAINS HIGH?
Housing supply increases with high sales prices
But why demand remains high when prices are so
high?
Households purchase houses as a way of investment
Urban household saving rate remains high at about 25-
30%
Inflation has been high over the last few years, and
liquidity is plenty
Interest rates of savings accounts are low due to lack of
competition in the banking sector
Stock market is under-developed and poorly regulated,
and has been running down for 6 years
Demand ahead of time due to “mother-in-law factor” (Wei
and Zhang, 2012)
24. NEW REFORM DIRECTIONS ANNOUNCED BY THE CPC
18TH CENTRAL COMMITTEE’S THIRD PLENARY SESSION
ON NOV. 12, 2013
Hukou: (gradually) relax controls on farmers settling in
cities and towns
Land: form a construction-land market that unifies urban
and rural areas, and allow the sales, leasing an
demutualization of rural, collectively owned buildable
land under the premise that it conforms to planning
Taxation: raise share of direct taxation, improve local tax
base (property tax and consumption tax), and accelerate
property tax legislation
Financial market: accelerate interest rate liberalization
Role of government: shift to service-type government,
and form a comprehensive assessment system for
officials’ performance to rectify the one that over-
emphasizes GDP growth