At the moment the Chinese property market is confronted with great stress. The local governments of different cities and provinces have to take measures in order to rescue their property markets.

Only 24 hours after the issuance of the “24 Clauses” by Hangzhou municipal government, Shanghai Accumulation Fund Management Center posted a notice of doubling the loan quota of the supplementary accumulation fund on its homepage. The local governments of different places in China were all trying to rescue their own property markets. Shanghai, the economic center of China, finally had some actions.

At the same time, the frequency of the discussions among the Chinese central government increased reasonably. This increased people’s expectations for the collective market rescue by the central government. The top leaders of China took an acquiescence attitude towards the market-rescue policies issued by the local governments of different places. According to the professionals, this was an important factor for the local governments to put more efforts in the market-rescue. According to the analysis of the Vice Director of Yiju Property Research Institute Yang Xuhong, the market rescue by the local governments will be followed by the market rescue by the central government. It is known that the market-rescue program may include a reformation to the land appreciation tax, adjustment to the property market according to the local conditions, modification of the “second residence policy” and reduction or remittal of the tax generated in the transaction period. The State Administration of Taxation was studying the reformation of the land appreciation tax.

Market Rescue by the Local Governments 

According to a report of the Oriental Morning Post, on October 13, Hangzhou Municipal Government issued the Suggestions on Promoting the Healthy and Stable Development of the Property Market in Hangzhou (hereafter Suggestions or “24 Clauses”). The content of the Suggestions showed that Hangzhou Municipal Government planned to give a general support to its property market, which was quite different from the former measure of adjustment.

On September 28, Nanjing Municipal Government issued the Suggestions on Promoting the Healthy and Stable Development of the Property Market (hereafter “20 Clauses”). Its aim was to revive the property market of Nanjing.

The market-rescue file of Nanjing and Hangzhou were similar in name. The “20 Clauses” of Nanjing was the first systematic and comprehensive policy of market rescue issued by the local government in China.

From the middle of this year, some local governments began to take measures to stimulate their property markets. Before Nanjing issued the “20 Clauses”, Shenyang, Changsha, Fuzhou and Chongqing all took measures to rescue their property markets.

Frequent Discussions in the Central Government

While the local governments of China were busy rescuing their own property markets, the central government also began to pay more attention to the properties. During September, experts in finance and properties were frequently called to attend meetings.

In October, nine ministries of China, including the Ministry of Housing and Urban-Rural Development of the PRC (MOHURD), the National Reform and Development Commission (NDRC), the Ministry of Commerce (MOC) and the People’s Bank of China, convened a meeting in which they talked about the status quo and the future of the Chinese property market. Those nine ministries consist of the Ministerial Meeting for the Adjustment and Control of the Properties. The MOHURD is the department that is responsible for the Chinese property industry.

In 2008, the property market entered the adaptation period after its summit. The land appreciation tax undoubtedly gives the land developers a lot of pressure. Therefore some of them are hoping for some adjustment to the land appreciation tax. They hope to turn the tax into the afterwards liquidation, which can relieve them from the stress of capital and ensure the development of their project in a later period.

On October 10, the spokesman of the State Administration of Taxation of China admitted that they were studying the reform of the policy of the land appreciation tax. He also said that the meeting mentioned above was one of the serial actions for the adjustment to the land appreciation tax and was irrelevant to the policies of stimulating economy and adjusting property market.

Rumors about the New Policy of the Property Market

According to the report from China Business News, there are rumors that the beneficial policies for the property market will come out in the middle of October. The MOHURC said on October 14 that it was not convenient for them to give any comment about that. However, a senior expert of the Chinese property industry said that the relevant authorities were studying some new policies with regard to the properties. Meanwhile, he also attenuated that the new policies might not bring modification to the former documents but may issue some new documents.

According to his statement, the basic tone of the newly-issued document might already have been established. The basic tone of last year was mainly to adjust the property market by adding more pressure to it. In the future this basic tone may not continue. In the future the beneficial policies may include a reformation to a policy of land appreciation tax, the opening of the direct financing ways except the bank credit for the land developers, solutions for the rural land flow and the “small property room”.

Among these options, the most likely one is the policy about the land appreciation tax. It is known that the authorities already have a definite attitude towards the reform of the present policies.

For the “second residence policy”, which is a popular topic among the public, the senior expert thought that the possibilities of the new policies were small. In fact, with the issuance of the market-rescue polices by the local governments in China, the adjustment policies of the second residence have already been loosened.

There is still no exact time for the issuance of the new policies. The expert said that based on the optimistic forecast there might be some actions of the central government at the end of this year. If the pressure from the international economic situation is too big, the issuance of such policies may speed up. The expert also said that the relevant policies were still in the stage of countersign. They have not yet been reported to the central government. This means there are still different options.