Shanghai stocks, led by real estate developers, jumped 3%+ today, in part on the “news” that one government official had said there would no introduction of a property tax for three years, and another one had said that there are no near-term plans for even harsher real estate rules. Investors and developers have been very worried about a looming property tax and the threat of more regulations, so it is huge news if these statements are true and reflect official policy.
The China Times reported that on Sunday Huang Hanquan, assistant director of the industrial institute of the National Development and Reform Commission (NDRC), the nation’s top economic policymaking agency (and former State Planning Commission), said “Taxes on holding of residential properties is impossible at least for another three years.” The paper also reported that Kong Jingyuan, director of the Department of Economic System Reform at the NDRC said that China “will not unveil tougher new rules aimed at further reining in China’s property market in the near future”.
Huang denied he made this statement in a call with Bloomberg New Monday morning. Did the China Times make up this quote out of whole cloth, or were Huang and Kong speaking out of turn?
A report this afternoon from Xinhua, quoting the NDRC, supports the idea that Huang did make this statement and now everyone is trying to backtrack. So far the article-发改委:三年内免谈房产税说法不代表官方立场 (NDRC: “”No Property Tax For Three Years” Does Not Represent An Official Position”)-is only in Chinese. The NRDC statement says that Huang is a researcher, what he said represents his personal views only, and that the story is seriously in error and had very negative consequences. The NDRC statement also says that Kong Jingyuan neither made external statements about real estate nor accepted any media interviews. It does not say he did not say it.
Has China been so spooked by the Eurozone crisis that it has refilled the bubbly punch bowl? Bloomberg News reports on a commentary today written by another NDRC official:
China should be cautious in introducing new tightening measures as the global economic environment is complex, Xu Lianzhong, an official with the National Development and Reform Commission’s price monitoring centre, wrote in a commentary published today in the China Securities Journal. The European debt problem is one of many global economic uncertainties that China faces, Xu wrote.
I first saw news of the NDRC positions in a message from SOHO China founder Pan Shiyi on Sina Weibo (a Twitter-like service.) Pan wrote that he had heard from colleagues in the real estate and friends that an NDRC official had said there would be no property tax for three years and no harsher measures in the near-term. My guess is that the NDRC officials were speaking privately with a small number of people and word got out.
So what is going on? I have written in several posts about a possible Chinese property tax. The technical implementation complexities, the impact on the various powerful interest groups and the politics surrounding this new tax make its introduction unlikely anytime soon. And last week the State Bureau of Taxation (STB) also made it clear that, in spite of the various municipal property tax that the media has reported on, only the central government, not the local governments, has the power to introduce a property tax.
Whether or not the NDRC said what they are reported to have said, this apparent lack of consensus inside the government is good news, at least in the short-term, for Chinese investors. Coupled with the Eurozone crisis, and the signaling from yet another NDRC official that caution is needed in introducing new tightening measures, it appears that for now Chinese government may have scaled back plans to introduce even tougher rules to cool down the real estate market. But at least one real estate developer warns that investors might want to avoid too much renewed optimism. As Soho China’s Pan Shiyi wrote about the NDRC news on his Sina Weibo last night:
犹如濒临淹死的人看到海面上漂来一块木头。但还是不要乐观要做好最坏的打算. It is like a drowning person seeing a piece of wood floating on the sea. But don’t be optimistic, make plans for the worst.