China created a new government agency on Thursday, which normally isn’t big news, but the new bureau set up to track real estate assets nationwide could become a key weapon in Xi Jinping’s struggle to tame his own bureaucracy.
The agency was set up under China’s Ministry of Land and Resources as part of a major push by the Xi government to reform the role of the party and limit the degree to which the bureaucracy preys on the country’s population. While the sincerity and practicality of this campaign has been widely questioned, one of China’s best known economists thinks it’s serious business.
Why a National Property Registry
The rapid establishment of a national database of real estate is a necessary tool for enforcing a property holding tax, and could also be used to track the assets of individual officials, many of whom have previously been exposed as having accumulated real estate holdings far beyond what could be acquired through their salaries.
How serious the country’s new regime is about turning China’s famously gluttonous bureaucrats into civil servants is a matter of much debate, and the political will and skill required to perform this type of surgery on China’s administrative apparatus is a challenge for even the most determined reformer, but a former top Morgan Stanley executive seems convinced that this is Xi’s mission.
Andy Xie Sold on Xi Campaign
I had the privilege of having lunch this past week with economist Andy Xie, who stated that among the current leadership’s goals is reducing exploitation of the population by government bureaucrats, particularly the misuse of the property market to prop up local governments and enrich local officials.
“China’s property market has been set up as a big casino, where the average person might win big or might lose big, but the government always makes a profit,” the former chief economist for Morgan Stanley in Asia Pacific said during a luncheon arranged by Shanghai’s Foreign Correspondent’s Club.
According to Xie, the number of government officials per capita has never been higher in China’s history, and his belief is that Xi aims to reduce this creeping blight on the nation’s economy by forcing ministries to restructure, and more closely controlling the behavior of individual officials.
The famously outspoken Xie had predicted in 2006 that the US economy would crash in 2008, and on 14 August 2008, Xie released his post “Apocalypse Soon” on his blog, detailing how the entire U.S. financial system would shortly unravel. On 15 September 2008, Lehman Brothers filed Chapter 11 Bankruptcy, and Merrill Lynch was sold to Bank of America in a shot-gun deal.
Property Registry Proceeding on Schedule
In the case of the property registry at least, the government has laid out a plan which won’t require Xie’s crystal ball.
“China is developing the foundation of a unified property registration system this year. In 2016, it can establish the property registry and before 2018, the platform for information management will be operational,” the Ministry of Land and Resources announced in April of this year, setting out a four year time frame for implementing the new measure.
Also in April, the Ministry announced the property registry would be implemented on a pilot basis in the cities of Nanjing, Ningbo and Zhengzhou starting in June this year.
Fear of Reforms Already Bringing Down the Market
While local officials, many if not most of whom are said to have accumulated significant property holdings, can be expected to do as much foot-dragging as possible to protect their ill-gotten loot, some observers are already noting a flood of luxury properties on the second hand market triggered by the property registry and Xi’s anti-corruption drive.
In private remarks that were leaked on the internet earlier this month, Mao Daqing, a senior executive at China Vanke, the country’s largest developer by sales, noted that many owners of properties priced over RMB 40,000 (US$ 6,390) per square metre have been dumping homes onto the market for quick sale in recent months due to Xi’s anti-corruption campaign.