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Critical Analysis of the Housing Price Policy the Chinese Government Enforces
Abstract
According to the analysis of the causes of high housing price in China, the Chinese
government has established series of policies to handle the problem. Although all of these
measures’ aim is to control the high housing price, they work a little and the problem tends
to be more serious.
In order to curb the high housing price and maintain it in a certain level, the Chinese
government not only has to obey the principle of economics but also needs to modify the
policies for the further study according to the China’s actual condition.
Studying the field of the real estate is always the government responsibility and they need
to make every effort to ensure every Chinese people afford to buy the houses to maximize
the social welfare.
Key words: Income distribution system, Tax system, Development of western area
1.0 Real Estate Policy and its Objectives
To solve the problems of the current high prices, there are a lot of measures. I will analysis
theses polices in three aspects. The first aspect of government polices is to increase
Chinese people income, the second aspect is based on the demand and supply policies and
the third aspect is about the regulation of housing transactions.
1.1 Policies about improving resident income
This measure is mainly to increase the income of low-income groups so that they can
afford to buy the houses. In order to reach the goal, the Chinese government attempts to
improve the income distribution system, in which they will raise the proportion of
household income in the national income distribution and the proportion of labor
remuneration in primary distribution (China’s Economy 2010). What’s more, increasing
the urban and rural resident income level to narrow the gap between rich and poor is also
what they are trying to achieve.
1.1.1 Insist on the principle of improving, enlarging and limiting.
Firstly, the Chinese government is trying to improve the income of low-income groups by
gradually increasing poverty alleviation standard and minimum wage standard as well as
establishing the mechanism to ensure the growth rate of salary maintain in a normal level.
As for the high-income groups, the government takes the corresponding measures to
confiscate illegal income (Chinese Journal 2012), expands the transfer payment,
strengthens the tax adjustment, and breaks the business monopolies to create equal
opportunities.
Secondly, enlarge the scale of the middle class through training workers. The government
is trying to pay more attention to the development of education and science and encourage
the innovation and start a business. Thirdly, limit the high-income groups’ income. This
can be realized by the progressive tax system, in which high earners more taxes and low
earners low taxes.
1.2 Policies about housing supply and demand
Firstly, increase the housing supply. The government has adopted a series of measures of
increasing affordable housing supply, such as low-rent housing. The main objective of the
measure is to solve the housing shortage problems since the price of the affordable houses
is less than the commercial houses.
Secondly, increase the housing land supply and decrease the cost of land supply. The local
government offers affordable housing project more land, tax and other preferential policies
to attract developers to participate (Hunag 2013). This can reduce the cost of a part of the
land, so as to have the effect of lower prices and the government can offer the low- income
people more affordable houses to solve housing shortage problems.
Thirdly, the government plans to reconstruction of old city, build satellite towns and
strengthen the construction of rural communities to meet people’s housing dreams to lower
down the housing price.
1.3 Policies about regulation of housing transaction
Firstly, check the vacant houses. The government decides to regulate the commercial
housing, which no one lives in, at regular intervals by imposing the tax on the vacancy. For
those who own two or more than two houses, they will be the supervision target (Settle
Down 2013). The main objective of imposing the tax on the housing vacancy is to destroy
the false prosperity of the real estate in China and curb the real estate speculation.
Secondly, impose the tax on the personal house purchasing less than 2 years. The housing
purchaser has to pay the tax according to the sales of housing. The main objective of the
policy is to avoid the situation that the speculators are driving up the price.
Thirdly, impose the tax on second-hand housing transaction. Because the frequent trade of
second-hand houses will push up the housing prices, so the government impose the full of
tax on the second-hand housing transactions to reduce the housing price.
Fourthly, the down payment of housing loan for the second house should not be less than
40% of the principal. It can not only avoid the commercial banks blindly offer housing
mortgage loans to the people with low credit ranking and low loan repayment ability, but
also can curb the real estate developers to blindly build the houses to waste the social
resources (The Big Winner of Wealth 2013)
2.0 Economic Theory of Real Estate policy
In this section, there is also reasonable to divide it into three logical parts according to the
real estate policy.
2.1 Economic Theory of improving resident income
Firstly, the government increases the poverty alleviation standard and minimum wage
standard as well as establishing the mechanism to ensure the growth rate of salary maintain
