Beijing steps up efforts to build subsidised flats

Beijing is showing increasing political willingness to interfere with the housing market, with the latest circular from the State-owned Assets Supervision and Administration Commission urging corporations under central government control to play an active part in building subsidised flats for the urban poor.

Explaining why the central government is putting so much emphasis on its subsidised housing plan, economist He Jun , from macroeconomic research consultancy Anbound, said: “It is already a political plan. And a political plan is what Beijing will have to accomplish, whatever the cost.”

 

Considering that the Communist Party was scheduled to select a new leadership team late next year, Beijing “is obliged to prove its ability to deliver its promise”, he said.

The commission circular was issued after President Hu Jintao and Premier Wen Jiabao visited subsidised housing projects over the three-day May Day holiday. Hu visited a household that had just moved into a cheap rental flat in Tianjin and Wen went to a construction site in Beijing.

The central government is, at the same time, trying to mobilise the funds needed to finance the massive programme. Analysts estimate it will cost 1.3 trillion to 1.4 trillion yuan (HK$1.55 trillion to HK$1.67 trillion) to build the 10 million subsidised flats planned for this year.

Zhu Jianfang , senior researcher in macroeconomics at Citic Securities, said that judging from the progress of the programme to date, 60 per cent of those flats would be completed this year.

Beijing also plans to build 10 million subsidised flats next year and a total of 36 million over the life of the 12th five-year plan, from 2011 to 2015.

Construction of the 10 million flats planned for this year should be launched no later than the end of October, analysts quoted the Ministry of Housing and Urban-Rural Development as saying.

Li Hongmin , an economist and real estate industry specialist with Hansen International Strategy Consultant, said all countries at a similar level of development to China’s (as measured by their per capita GDP), experienced more social problems.

Urban housing could be a hotbed for many problems, and if Beijing did not take it more seriously than before, “it would affect it in both political stability and economic development”, Li said.

However, precisely because the development of subsidised housing is a political decision of the central government, it is winning little sympathy from local governments and companies outside the state sector.

Industrial Bank chief economist Lu Zhengwei said that although providing more subsidised housing was the right direction, the central government could have done it more skilfully by designing more incentives for market players.

Lin Songli , an economist with Guosen Securities, said the commission’s new directive showed Beijing had decided to go it alone, despite reluctance from many local governments and real estate developers. He said he was worried that local governments would seek to attract investors to “stir-fry” other types of property development to increase revenue from land sales, instead of focusing on housing.

By Ed Zhang of South China Morning Post

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