Critical Analysis of the Housing Price Policy the Chinese Government Enforces

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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