(BEIJING) China should levy a general property tax to discourage speculation and rein in runaway real estate prices, according to a member of the central bank’s monetary policy committee.
Fan Gang’s comments in the latest issue of a Chinese Academy of Social Sciences magazine echo concerns voiced this week by Premier Wen Jiabao that China’s soaring housing market must be brought under control.
‘Realty investors don’t care whether their houses can be rented out or not,’ Mr Fan said in an interview. ‘If a continual and incremental tax is imposed on real estate, investment in the sector will cool down.’
Mr Fan, one of China’s best-known economists, has previously called for an annual tax on homeowners based on the value of their property but had previously said that technical obstacles stood in the way. His latest comments described the reforms as urgent.
‘Demand will continue to expand unchecked if realty investors are not required to pay anything to compensate for the housing price hike,’ he said.
China has adopted a number of measures to cool the real estate sector, such as increasing capital gains taxes on property and tightening land-use rules.
But property prices have resumed their surge, up 9.5 per cent year-on-year in October and even more in major cities, after briefly calming earlier in the year.
Mr Fan, who is also director of the National Institute of Economic Research, added that authorities must crack down on insider trading and illegal loans in the stock markets, or ‘the consequences will be unthinkable’.
However, he was optimistic about China’s potential for stable growth at around 11 per cent a year, saying that the country would continue to benefit from low labour costs, a high savings rate, capital inflows and advances in education and technology.
The challenge, he said, was for China to fix its economic problems from its current position of strength, so that it would be better able to withstand international financial crises.
He also said that the profitability of Chinese businesses was exaggerated because of artificially low resource prices, tiny social security outlays and lax environmental rules.
Source: Reuters (Business Times 22 Nov 07)