Tax the goddam second/third/etc homes nationwide. Much easier. And way overdue.Should be a boost to local governments revenues, if they are running out of land to sell leases on, they can start to sell leases on the air space above the land
Chinese Economics Thread
- Thread starter Norfolk
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I mean, introduce a general property tax, and a high property tax for 2+ apartment/house/home, and a luxury tax for single detached house.
It is not done because corruption is organ deep. every man and their cats are in on this corruption.
A general property tax is probably not done because it would make a lot of home owners angry (which is especially dangerous because China has a relatively high home ownership rate). Corrupt officials are more likely to purchase housing overseas where it's less prone to party oversight, in which case domestic property taxes are irrelevant (Bo Xilai supposed bought his wife an estate in the French Riviera before he got sent to prison).
So I don't think it's necessarily related to corruption, otherwise why would the government implement the Three Red Lines policy which reigned in real estate speculation and devalued property assets in the first place? If anything, implementing a new tax would encourage more graft and corruption because it would open up the possibility of lower level officials siphoning a portion of that tax revenue away for personal use.
So I don't think it's necessarily related to corruption, otherwise why would the government implement the Three Red Lines policy which reigned in real estate speculation and devalued property assets in the first place? If anything, implementing a new tax would encourage more graft and corruption because it would open up the possibility of lower level officials siphoning a portion of that tax revenue away for personal use.
The more you try to pleasure these home owners (mostly speculators) you are sacrificing your future generations. Just do a clean up and be done with it. Chinese government is not even doing enough to lower home price. Home price is having sign of increase again.
Fundamental crux of the issue is that China is simultaneously over-financialized and under-financialized at the same time.
By not having functional capital markets that can effectively allocate capital to firms that need it to expand and fund necessary capital projects; it shoves large household savings into either bank accounts that yield 0% or real estate speculation that has no benefit to the real economy but does make small business development and homeownership prohibitively expensive to new homebuyers; instead of real estate being financialized by being used as collateral for commercial real estate developments, it's now financialized by being used as a pure speculative instrument and various short-termism leads to either gigantic financial crises (wealth effects, sentiment shocks, capital flight, etc) or kicking the can down the road.
perhaps the way to go is to levy (or increase) sales tax of real estates, or at least the tax the profit of a sale. it incurs no extra cost to holding a property, but if you want to sell it to make money, you gotta share some of that profit.
That is in financialized economies like US and UK, which saw their growth all but buzzsawed down by quite minor events that each caused huge waves.
China's strength has always been in its consumer economy, not finance, very much by design. The philosophy of China is that the primary purpose of money is to be spent, not stored. The spending of money in turn causes income growth, lifts QoL and sustains the boom. The whole nation is geared towards pandering to the middle and lower class, this is not out of charity reasons, but simply pragmatism. Wage earners are by far the ones that build the country the most, contribute the most to science, to tech etc.
Having nearly no financialization in the economy is arguably what keeps China booming even as it is entering economy size and productivity levels that has never been reached by any other single country in human history.
The loop of reinvesting money into the wage earning class creates an unbeatable cycle, an engine that lets China move more liquidity than any other country in the world, invest practically unlimited funds on anything it wishes.
The government actually does it better actually, without private ownership that only cares about massive profits, Chinese projects can focus on less on profitability but more important things like infrastructure.
The government provisioning public goods like infrastructure is well established but Chinese biotechs needing to go find US-based partners to take their drugs to trial because China has catastrophically apocalyptic equity capital markets that don't allow for effective funding of risky capital projects like clinical trial or the government needing to waste precious time and effort on gigantic VC rounds for SMIC building a foundry because China's dysfunctional and illiquid capital projects blocked it from issuing a bond with a maturity timed to its completion? yeah - that's from China's poor capital markets governance. Heck, China needed to beg and cry and threaten so that state-owned life insurers and banks would buy China Government Bonds to fund China's unsustainable budget deficits (in part, for infrastructure) because for even those close to the government, they don't trust the risk and liquidity profiles of CGBs while treasury bills are cash equivalents
Source? Trust me bro?
Show your source or shut up.