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"Housing and Urban-Rural Development Authority"
in Foshan City, Guangdong Province, formerly announced,
that from October 12, residents in Foshan City would have
less restrictions on house purchasing.
However, the authorities changed the policy immediately.
After 12 hours they issued a notice "suspending" the policy.
Experts point out that this incident shows
how such a policy can lead to a local financial crisis,
as the Central Committee of the Chinese Communist Party
(CCP) and the local governments' policies oppose each other.
The Central Committee released a policy of "five new items"
late last year, followed by "restriction policy" in more cities.
Over the past year the number of real estate trades decreased
significantly, while the price has not dropped significantly.
"Housing and Urban-Rural Development Administration"
in Foshan City issued a notice on the morning of October 11,
that since October 12 they would relax the restriction
on house purchasing for people of four categories.
However, after 12 hours, the authorities issued another notice
of "suspending to carry out" this policy.
The reason for the suspension was "to further consult with
the community and assess implications comprehensively."
Hong Kong's Asia Week reported that Li Keqiang's
phone call was the reason for this "suspension".
It reported that Li was currently in charge of real estate
market regulation and housing construction protection.
Furthermore, as he is expected to become the next premier,
a real estate bubble would not be a good prospect for him.
The transactions in real estate were very few during October 1
holiday, which exacerbated the panic in the local government.
China's "Securities" stated that with the continuous changing
of the housing market regulatory policy,
the constructing business' fund was gradually withdrawn
this year, resulting in pessimistic market expectations.
In addition to land and housing market continuous bleak,
the most notable feature of housing market's drop
and strong regulation is the land's financing
large decline for the local governments.
It was reported that due to land finance's falling,
some cities' authorities have changed to "soft" restriction.
If this "soft" restriction is not promptly stopped it will
impact negatively the real estate macro control policies.
Liu Kaiming, head of the Contemporary Society Observation
Institute in Shenzhen, said the restriction policy is not wise.
Liu Kaiming: "I knew that land and property revenue
is the major income for the local governments.
The property prices will affect local revenue. Purchase
restricting' policy is not the way to market regulation.
Central government restricting the trade
is not the final solution."
Activist lawyer Tang Jingling points out,
that local interests' groups hope to relax property restriction,
to allow more people to purchase a house,
however, this bubble system will burst out one day.
Tang Jingling: "The relaxation of property restriction'
regulation is not the best,
because if the local government has severe financial crisis,
they will try to break through it.
Both, local and central governments have different
strategies to deal with the bubble economy.
Both, local and central governments protect their interests,
and the strategies just end up opposing each other."
According to source, Foshan's revenue depends on properties.
Last year's revenue from property was RMB38 billion,
with the public finance revenue being RMB30.6 billion,
or 24% lower than the property revenue.
At the end of September this year, the property revenue
only reached RMB18.3 billion, or 48% of that last year.
Tang Jingling: "Local interest groups and authorities want
to carry on this game, however, the country's macro economy
can not afford to play it. The central government and financial
sectors are facing bankruptcy and authorities have to choose
between bankruptcy of the banks or popping up the real estate
bubble. That's the reason for the housing restriction strategy."
Liu Kaiming told NTDTV that half of China's population
cannot afford to purchase a house.
However, many local officials are involved in the real estate
business, so local government is pushing up the house prices.
Liu believes that Foshan property restriction rapid change
shows that the central government is taking the economy route
instead of using a market strategy to solve this problem.
NTD reporters Lin Li, Zhou Ping and Zhou Tian