China is drawing up plans for a nationwide property tax, and commodity markets are spooked

Photo: Buddhika Weerasinghe/ Getty Images.

Base and bulk commodities had a bad session overnight, recording some substantial falls in the process.

While some put the weakness down to disappointment that Donald Trump may delay his mooted infrastructure investment plans back to 2018, there was another factor that almost certainly contributed to the unusually large price slide.

China is currently conducting preparatory work for a nationwide property tax.

As the world’s largest consumer of commodities, and with residential construction a large component of that demand, it’s easy to understand the reaction seen in commodity prices overnight.

Just have a look at the performance from Chinese commodity futures overnight.

SHFE Copper ¥47,480 , -2.61%
SHFE Aluminium ¥13,630 , -2.75%
SHFE Zinc ¥22,560 , -2.67%
SHFE Nickel ¥87,550 , -2.05%
SHFE Rebar ¥3,479 , -0.94%
DCE Iron Ore ¥687.00 , -4.05%
DCE Coking Coal ¥1,217.50, -0.37%
DCE Coke ¥1,664.00, -0.57%

According to Reuters, Lu Kehua, China’s vice housing minister, said that plans were currently being drawn up for a nationwide tax on property, expanding on the measures introduced in Chongqing and Shanghai — two of the nation’s largest cities — some six years ago.

Lu provided no specific details on the proposed tax.

His remarks followed those from his boss, Chen Zhenggao, China’s housing minister, “that the property market faces many contradictions and problems in 2017, and there are increasing uncertainties”.

“But I believe the positive aspects outweigh the negative ones and we have the ability and methods to stabilise the market,” he told reporters on Thursday.

The statements from Chen and Lu followed the release of data earlier this week that revealed growth in Chinese new home prices continued to slow in January.

According to China’s National Bureau of Statistics, new home prices grew 0.2% nationally last month, down from 0.3% in December and continuing the deceleration seen since policymakers in over 20 Chinese cities introduced tighter buying restrictions to limit rapid growth in late 2016.

Source: CBA

Chen said that trend will likely continue, telling reporters that property prices will remain stable in the first quarter of the year.

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