One of China’s leading economists believes it’s time for the country to bring an end to its land finance model in the wake of widespread market shifts.
Liu Shijin (刘世锦), vice-chair of the China Development Research Foundation, said it will be difficult for municipal governments to maintain the current land-dependent financing and growth model in the event of any one of several likely circumstances.
These include the end of expansionary monetary policy, a bursting of the real estate bubble, as well as an easing of the real economy due to the onerous costs imposed by high property prices.
Liu made the remarks at the China Finance 40 Forum according to a report from Wallstreetcn.com.
Liu pointed to the need for China to levy a real-estate tax, in order for government to enjoy a standardised, rule-of-law based source of revenue.
An effective Chinese real-estate tax will be dependent upon a number of pre-conditions, however, including opening up of the market for land as a factor of production, correction of distortions in land prices, removal of excessive land premiums and avoidance of duplicate levies.
Liu also sees land reforms as lying at the core of efforts to spur growth in China’s domestic demand, by allowing urbanites to purchase homes in rural villages, for example, as well as providing effective legal title to small land owners, and allowing rural collectives and homesteads to enjoy equal participation on the market.
“Growth of 6.3% this year and the next several years can achieve the first century target, subsequently the growth target could be adjusted to between 5 – 6%,” said Liu.
“Infrastructure and real estate investment has already passed the historic demand peak, with modest downgrades in growth forecasts and a shift towards high-quality growth.
“The focus should be on indices such as employment, risk prevention and leverage control, corporate earnings, resource and environmental sustainability, growth in household incomes and upgrades to the consumption structure.”