Unless China start taxing propertg then good luck incentivising people to invest on stocks. Property is far more profitable and "reliable". And from what I have seen, I see little effort from Chinese government to implement property tax in near future.
Chinese Economics Thread
- Thread starter Norfolk
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Unless China start taxing propertg then good luck incentivising people to invest on stocks. Property is far more profitable and "reliable". And from what I have seen, I see little effort from Chinese government to implement property tax in near future.
This is not enough. The real effort should come from the local government budget not dependent on land sales anymore. And most importantly, law. Law is the most tricky part as many government officials enrich themselves from the property bubble and it may take years before the law is passed.
FriedRiceNSpice
Captain
I agree property taxes should be phased in, and local governments need to be weaned off land sales. Growth in housing prices need to be moderated and slowed and the home price to income ratio in cities need to be reduced.
However, there are a lot more obstacles in the way before the stock market can replace the real estate market as the main engine of wealth creation. Stock market would need reforms/regulations, efforts need to be undertaken to rein in speculation, collusion, and fraud. Better accounting standards and higher levels of transparency need to be established. Lastly, it will take time to build trust and confidence in the stock market from consumers. Wall Street driven financial system may not be the most desirable model for China, so policy makers might need more time to determine the future shape of the Chinese stock market.
How about encouraging Chinese people to put money in Chinese banks that then invest them according to strategic interests? The public is not great at deploying capital in the stock market and it’s so easy to manipulate as seen in the West. Banks at the minimum are subject to more regulations and also easy to control in China.
I think some of kind of low-cost passive broad based market ETF that tracks the broader Chinese economy or a group of target date funds administered as the default assets for investing the mandatory social security funds as default options would be a good start to set the stage and transparency for the investing public. The public then have the option to enroll additional savings into the same funds which are regulated and having them under the auspices of the social security funds would be a good confidence booster since it sends the message that your investments are under the same professionally managed umbrella.
You would need a specialized bank that invests just in strategic interests for that. Putting them into regular banks, like say ICBC would probably see a large portion of the funds end up in real estate for example, or other non-strategic assets since banks are in the business of making money. They aren't going to be lending money to niche startups and such that may take years to make a return on the asset. The public shouldn't be acting as stock pickers for the most part, their funds are best served investing in assets that track the broader economy, as it grows wealthier, so will they. The government collects plenty of tax revenue and it can act as a "bank" by choosing to disburse funding for strategic initiatives as it sees fit.
I do not believe the article is complete nonsense, but it seems to fall short in reflecting how times have changed.
Before, FDI that come through Hong Kong, was counted as FDI but everyone knew that was Chinese money just being re-routed for whatever reasons.
So less is coming through, but clearly Chinese capital has gone worldwide seeking investments and returns, aka the BRI.
If China was still a developing country, then this could be important.
Since China's manufacturing base is larger that the United States, Japan, and Germany combined, then this is just a footnote.
These articles are helpless and hapless.
I guess moreso when we consider where we have been and where we are going. Keep on trucking.
