Real estate is king for China's cities as tax revenues stumb

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Real estate is king for China's cities as tax revenues stumb

Сообщение upamfva » 10 июн 2021, 06:44

Real estate is king for China's cities as tax revenues stumble

China's regional governments are taking in proceeds from land sales that are equivalent to more than half of the country's combined tax revenue as coronavirus relief measures diminish traditional intake from levies.To get more news about china housing market, you can visit shine news official website.

This has buoyed the budgets of big cities such as Beijing and Shanghai, which are seeing sustained building booms, but has done little to help other cities where real estate markets are in a funk.Sales of government land brought 16% more in revenue last year at 8.41 trillion yuan ($1.30 trillion), a sum equivalent to the value-added tax and corporate income tax, two mainstays of China's tax regime, combined.

Due to tax cuts targeted at fighting the pandemic and the slowdown in economic growth, overall tax receipts collected by the central and local governments shrank 2.3% to 15.43 trillion yuan in 2020, the first decline in 44 years. This put the intake from land sales at 55% of that figure, up from 26% in 2015.

Chinese municipalities often sell land to condominium developers. Local authorities also collect five other taxes relating to real estate, including one for using urban land. Revenue from the five taxes quadrupled over the decade through 2019 and expanded to 25% of local government receipts. Figures have yet to be disclosed for 2020.In the top tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, the extra liquidity from coronavirus relief has sent an influx of money into their property markets. Condo sales have picked up.

Sales of state-owned land by area jumped by double digits last year in all four cities. Beijing's land sale receipts climbed by 15%, and the other three cities enjoyed 50% gains. Certain inland metropolises like Chongqing and Xi'an also experienced a rise in land sale receipts.

At the other end of the scale, acreage sold in the cities of Tianjin and Zhengzhou shrank in 2020 from the previous year, causing budget receipts there to undershoot forecasts.

The coronavirus left deep scars in those cities, and demand for real estate failed to recover. At a November land auction in Tianjin, no developers showed up to bid, according to local news reports. Tianjin, a northeastern coastal city, ended up with a budget shortfall of more than 40% in 2020 after recording a deficit the previous year.

A lack of land revenue could have an impact on debt repayment by local governments, which fund infrastructure projects by issuing so-called special bonds. Money from real estate sales make up 90% of the pool used to repay the bonds. Local governments sold 3.75 trillion yuan of special bonds last year, up 1.6 trillion yuan from a year earlier.If land transactions are underperforming, it will affect the debt management at local governments," said Yan Yuejin at the E-house China R&D Institute, a real estate think tank, indicating risk to future infrastructure investment.

In January, Fuzhou stopped requiring applicants to submit their ages, occupations and academic record when they sign up for household registration. The city in southeastern China aims to attract not only more highly skilled professionals, but also additional migrant workers coming from rural areas.Fuzhou was home to 7.1 million people in 2019 based on household registry data. "Our goal is to top 10 million people by 2035," a senior city official told Chinese media.

Suzhou will open household registries to those living in rental units, bucking the trend in several cities of limiting this privilege to homeowners. Home registry opens the door to better public services, which would attract new residents.

Suzhou and Nanjing, another city in Jiangsu Province, will mutually honor points toward household registry gained in each city. As long as new arrivals travel between the two cities, the points earned will not be reset. Suzhou and Nanjing aim to increase the mobility of workers between the two cities and expand the metropolitan region.
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