After the start of the new year of 2021, the real estate tax, which is related to thousands of households in China, is facing the issue of levy. Dr. Cheng Xiaonong, a travel economist in the United States, said that from the macroeconomic perspective, the Chinese Communist Party will levy the property tax sooner or later; and the result of levying the property tax is that the local government will have a new source of revenue, but the consumption of the overall economy will be reduced as a result, which will lead to more depression in the service and manufacturing industries, and there is no possibility for the domestic economy to rebound.
Since three years ago, the Chinese Communist Party has included real estate tax in its five-year legislative plan. In May last year, the CPC State Council issued a document mentioning the need to steadily push forward real estate tax legislation. At the end of last year, the Academy of Social Sciences recommended accelerating the introduction of real estate tax; subsequently, the Party media published an article by the finance minister to promote real estate tax legislation and reform. In response to the much-anticipated real estate tax issue, Cheng Xiaonong believes that the local finances of the Communist Party are in serious trouble and that the real estate tax levy legislation will be passed and implemented a year later.
[Recording]: In the past, there was a Provisional Regulation on property tax in China, which has been used for decades. This regulation provides that residential housing is exempt from property tax as long as it is not used for commercial purposes. Recently, the Chinese Communist Party is going to announce that it is going to, Finance Minister Liu Kun wrote an article in the Chinese Communist Party’s People’s Daily, saying that it is going to actively promote the property tax, in addition, there is also some information in other areas, so it seems that the Chinese Communist Party is ready to collect the property tax.
According to Cheng Xiaonong, property ownership in mainland China is now nearly saturated, and more people are buying houses in big cities for speculation, that is, as an investment, thinking it will steadily increase in value. This has led to soaring property prices in big cities in the past, but now, in a situation where the overall supply of real estate exceeds demand, it will be difficult for real estate companies to buy as much land as before; with the relative contraction in the scale of real estate companies buying land, it will be increasingly difficult for local governments to support their land finance. If the real estate is not sold, the local government can not sell land, land finance will be broken. Now that there is a complete imbalance between supply and demand for real estate, real estate prices have begun to fall one after another. In Beijing, the average drop is 16%, and some suburbs and other places have dropped by more than half, the property market has entered a bear market, in this case, the local financial revenue sources are facing disruption, that is, some important sources may disappear.
On the other hand, the government, the local finance of the Chinese Communist authorities, has long relied on the development and development of real estate to sell land, so to speak, to obtain land concession income, so that it can, there is a kind of so-called land finance, that is, most of the income of local finance depends on the sale of land. So if the real estate can no longer be further developed, real estate companies are now very tight capital chain, because the house is not easy to sell, house prices are falling, the more down the less easy to sell. In this case, the debt of this real estate companies, and local governments to develop real estate and invest huge amounts of money to do infrastructure construction, then this debt is also has reached a very high scale, now it is real estate companies plus local governments, including the debt, together, has constituted a threat to the banks. That is, if the financial system waits like this, there may be a crisis in the financial system. So the Chinese Communist Party must now begin to prepare for a rainy day, so it began to brew, to speed up the legislation of real estate tax collection. The legislation has not been passed yet, but it is estimated that it will be passed and implemented a year later.
Cheng Xiaonong said that this year, the Chinese Communist Party has clearly announced that it will no longer support real estate, because last year the Chinese Communist Party invested more than three to six trillion yuan in government investment in the hope of boosting the economy, but the money went to real estate. Local governments are not taking this money to boost the economy, but to pay off old debts, and want to continue to issue new debts. This situation is tantamount to idle funds. So the Chinese Communist Party also knows that using government investment to boost real estate is no longer effective. Now the CCP has set up a nationwide networked real estate information platform and done the technical aspects of real estate levy. Even if you live in Shanxi and then buy several houses in Beijing, after the national networking, all the data about individual properties can be found, then Beijing can levy taxes.
So from the future, this property tax policy of the Chinese Communist Party will greatly increase the burden of the residents, they must be in, whether he buys a house, or in order to live, or for investment, must be greatly increased a tax, real estate tax expenses. Then people who did not buy a house, the future of his house prices also naturally ah, house prices fell, but the property tax out, so the burden of the people who bought a house also increased, the people who rented a house will also be because of the property tax relationship his rent will also rise. So the whole property tax will come out to curb the consumption of the Chinese Communist Party and further weaken the consumption power of the residents. But the CCP has no choice, if it does not do so, then there is no way to maintain its finances, especially the local finances. This is the basic economic situation of the CCP now.
Cheng Xiaonong said that the levy of property tax gives local governments a new source of revenue, but the overall economy will have less consumption as a result, which will lead to more depression in the service and manufacturing industries and lose the possibility of an economic rebound.
In the future, in the long run, because the property tax is permanent, the depression will continue for a long time. In other words, there is no possibility of an economic rebound. Because of the reduction in consumption, first of all, the service industry will reduce revenue, many service industry stores will close down, and then the shopping malls will also be in the same situation. Because the tax on shopping malls is a big extra expense in the pockets of the residents, and if this expense is used to pay the tax, it will be difficult for the residents to have extra money to spend. So for them, they will probably say, squeeze consumption to squeeze out money to pay the property tax. So the property tax is a direct result of squeezing consumption, curbing consumption. In other words, the Chinese Communist regime has come to the point that although it wants to boost the economy and maintain consumption, it would rather let consumption continue to fall than not collect property tax in the face of the serious financial difficulties of local finance.
Recent Comments