Chinese Economics Thread

[Nutrient]

Property taxes are just too difficult to get implemented. There is a fierce lobbying by various interests and Local Govs against such taxes. Keeping in mind that this would also affect the poor/middle class people the most, you may understand how difficult it would be for the Central Gov to push for it.

Too difficult as there are too many entrenched interests benefitting by higher property prices.

I can understand property owners wanting to avoid the property tax, but why would local governments oppose it? The local governments should get enormous revenues every year from the tax, so why aren't they the biggest supporters of the new levy? I am asking this not as a challenge, but because I really want to know.

The property owners would lose a bit, but not too much if they sell before the prices fall. The anticipated drop in real estate values prompts another question: where will investment go now? To the stock market? Does China really want a bubble there?

A good way for the Central Gov to gain support would be for a tier system

poor people - no tax/extremely low tax
Middle class - low tax/normal tax
Rich/very rich - high/very high tax
(Separate system for companies)

This way the Gov would gain support among the people and directing their anger/opposition against the rich (a time-honoured tradition for Govs from around the world, trying to pass taxes)

I assumed the new property tax was tiered already. Was I wrong to assume this?

 

[Overbom]

I can understand property owners wanting to avoid the property tax, but why would local governments oppose it?

It would
decrease property prices = lower revenue
Decrease property sales (volume) = lower revenues.
It might be that the overall tax gain would not be enough to offset its decreased revenue. There is also the issue of the local gov skirting the bond raising rules by using the land investment schemes (100% sure I got the name wrong) which depend on the crazy assumption that land's value will forever increase so that the local gov can repay its bonds

There are some other issues i have read but I am not knowledgable enough to understand so.. However i know that there is resistance from local govs for such a tax

The property owners would lose a bit, but not too much if they sell before the prices fall

But they wont just lose a bit. Either not many people will rush to sell, or a lot of people will rush to sell thus having to lose a lot of their wealth due to a sudden increase of supply. And what about the people who dont want to sell? They will have to eat up the loss of wealth due to lower increase( or even decrease, depending on the tax implementation) in value (much less than inflation)

You cant just expect a 1.3 Billion people suddenly start selling, right?

The anticipated drop in real estate values prompts another question: where will investment go now? To the stock market? Does China really want a bubble there?

Thats the big question. Where the money will go. I am guessing that the Gov will want to funnel the rich people money to high tech industries (important to avoid financial engineering ala UK or lesser degree the US).
Rest of the money? Dunno. Maybe they will allow more outflows so that the Chinese can start investing around the world instead of creating a bubble in China.

I assumed the new property tax was tiered already. Was I wrong to assume this?

AFAIK there is not a single property tax. There are various schemes, pilots and trials. I dont think that the Chinese Gov has finalised the final framework for a unified property tax.

This stage is probably the most difficult for the Central Gov to pass. At the moment I think that China has formed a consensus that something must be done for higher prices but not how? What are the final rules and law? This is where the most lobbying and internal discussions are right now in order to find a common ground

Feel free to correct me, I had studied this 2 months ago so I dont remember a lot of staff now. I am quite certain that the whole post might have some inaccuracies but the overall point is that a lot of people with different opinions and interests are involved and are trying to shape the property tax inline with their own interests. Central Gov will need to reing them if it is to pass a true property tax (ie. not filled with loopholes)

 

[siegecrossbow]

I am not exactly sure where to put this, in economic thread or funny stuff thread.

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Are they making their own oxygen generators yet?

 

[Hendrik_2000]

Property taxes are just too difficult to get implemented. There is a fierce lobbying by various interests and Local Govs against such taxes. Keeping in mind that this would also affect the poor/middle class people the most, you may understand how difficult it would be for the Central Gov to push for it.

Too difficult as there are too many entrenched interests benefitting by higher property prices.

A good way for the Central Gov to gain support would be for a tier system

poor people - no tax/extremely low tax
Middle class - low tax/normal tax
Rich/very rich - high/very high tax
(Separate system for companies)

This way the Gov would gain support among the people and directing their anger/opposition against the rich (a time-honoured tradition for Govs from around the world, trying to pass taxes)

Couple it with China being a communist/socialist country then thats a double benefit for the Gov to gain support and by also promising that it could do as much possible to control the high property prices.

Shocking for western media which thinks that China is a monolith governed by an emperor issuing decrees left and right. Very surprising that such a big country has politics, various interests and lobbies /s

It doesn't curb speculation on the real estate. If you mean progressive tax, China already has progressive tax system. Yes property tax is the way to go It catch 2 anomaly in one fell swoop. Taxing speculation, provide revenue for city and prefecture. While at the same time reducing real estate transaction fee, release the land. And with it allowing the state to built government developer for subsidized housing.

China should wean away the fetish of Chinese to invest in real estate at all cost

 

[Nutrient]

It would
decrease property prices = lower revenue
Decrease property sales (volume) = lower revenues.
It might be that the overall tax gain would not be enough to offset its decreased revenue. There is also the issue of the local gov skirting the bond raising rules by using the land investment schemes (100% sure I got the name wrong) which depend on the crazy assumption that land's value will forever increase so that the local gov can repay its bonds

There are some other issues i have read but I am not knowledgable enough to understand so.. However i know that there is resistance from local govs for such a tax

Thanks for the reply. I wasn't aware that local governments had so much remaining land that the revenues from selling it would exceed the revenues from a property tax. Perhaps only a few local governments are so fortunate and therefore oppose the tax, and most of them are actually enthusiastic supporters?

But [the property owners] wont just lose a bit. Either not many people will rush to sell, or a lot of people will rush to sell thus having to lose a lot of their wealth due to a sudden increase of supply. And what about the people who dont want to sell? They will have to eat up the loss of wealth due to lower increase( or even decrease, depending on the tax implementation) in value (much less than inflation)

You cant just expect a 1.3 Billion people suddenly start selling, right?

I think 1.3 billion is exaggerating. My guess is 90% of China's population live in one home and would scarcely notice a drop in its value.

In any case, if China's population actually started to fall due to low fertility, the real-estate values would drop like a stone anyway. My understanding is that a major cause of low fertility is the excessive price of housing. So a property tax, by making homes more affordable, may actually raise fertility and cause real-estate prices to be higher than they would be without the tax!

Thats the big question. Where the money will go. I am guessing that the Gov will want to funnel the rich people money to high tech industries (important to avoid financial engineering ala UK or lesser degree the US).
Rest of the money? Dunno. Maybe they will allow more outflows so that the Chinese can start investing around the world instead of creating a bubble in China.

On second thought, investment will probably continue to go to real estate. The US has property taxes, and despite that its house prices are at stratospheric levels. To counter this in China, Beijing may have to do more than just a property tax.

AFAIK there is not a single property tax. There are various schemes, pilots and trials. I dont think that the Chinese Gov has finalised the final framework for a unified property tax.

That makes sense.

This stage is probably the most difficult for the Central Gov to pass. At the moment I think that China has formed a consensus that something must be done for higher prices but not how? What are the final rules and law? This is where the most lobbying and internal discussions are right now in order to find a common ground

Indeed. I'm almost glad I don't know much about this stuff, or I would have trouble sleeping! At least I can trust that Beijing does have experts.

Feel free to correct me, I had studied this 2 months ago so I dont remember a lot of staff now. I am quite certain that the whole post might have some inaccuracies but the overall point is that a lot of people with different opinions and interests are involved and are trying to shape the property tax inline with their own interests. Central Gov will need to reing them if it is to pass a true property tax (ie. not filled with loopholes)

You seem to be doing fine so far.

 

[Strangelove]

Construction & heavy equipment manufacturing companies - Chinese firms and the rest.

 

[caudaceus]

Construction & heavy equipment manufacturing companies - Chinese firms and the rest.

View attachment 76453

There's only one German and Korean firm? Very surprising , considering that Sweden got 3.

 

[DarkStar]

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I still find it hilarious that wilbur ross who infamously said that COVID would bring factories out of China and back to the US is now sanctioned by China which means no US company which wants to do business with China cannot employ him nor his family.

Talk about the the literal economic typhoid mary.

 

[Hendrik_2000]

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I still find it hilarious that wilbur ross who infamously said that COVID would bring factories out of China and back to the US is now sanctioned by China which means no US company which wants to do business with China cannot employ him nor his family.

Talk about the the literal economic typhoid mary.

Excellent article I like RT conclusion of the article

China doesn’t simply produce cheap junk, as many people would have you believe, but is manufacturing goods of an increasingly higher quality. As a surprise example, China, as of June holds

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of components for Apple than Taiwan – a high-tech economy – does. This perfectly illustrates how things are changing.

The conclusion is simple: throughout 2020, the media and political pundits got it wrong. As China beats off the Delta variant, it is also shrugging off calls to abandon its ‘zero Covid’ approach and, despite people’s geopolitical preferences, world business leaders are simply saying, “If it ain't broke, don’t fix it.” The key takeaway? You don’t choose your manufacturing hub solely on who the US likes or dislikes.

 

[Quickie]

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I still find it hilarious that wilbur ross who infamously said that COVID would bring factories out of China and back to the US is now sanctioned by China which means no US company which wants to do business with China cannot employ him nor his family.

Talk about the the literal economic typhoid mary.

The bigger revelation would be that the change in the global supply chain was part of "the plan".

Consider that this chain of events happened at the height of the trade war between the 2 countries and at the perfect timing of the mass migration of China's population during the year-end festivities not to mention this all happening during the U.S. Administration that was showing open hostilities towards China with diplomacy literally thrown out of the window, something that was unprecedented in history.