Economy/Resources - 45. page

The real estate industry in China is facing a severe problem. People are not buying and as a result, builders do not want to acquire new land from the government for development either. As a result, the local government’s income has dropped dramatically.

An Internet article listed many numbers to show that, in 2022, many local governments were severely short of money.

The article said that, according to data from the Ministry of Finance, from 2017 to 2021, the proceeds from the land use rights concessions was a significant portion (above 30 percent) of the total local government’s revenue. It had reached 8.4 trillion yuan in 2020 (43.59 percent of their total revenue), 8.7 trillion yuan in 2021 and the percent was 41.81. The local governments depend heavily on land sales.

The article then said that in 2022 the land use rights concessions brought in only 3.4 trillion yuan, a 31 percent drop from the previous years’ amount (Editor’s notes: The number does not match. China.com said the land use rights concessions in 2022 were 6.7 trillion yuan, a 23.3 percent drop from the previous year).

The article then discussed the percent completed of planned land use rights transferred in 2022. Among 22 cities, only four cities completed 100 percent or above. Beijing completed only 36 percent. Changchun City in Jilin Province and Chongqing City only completed 16 percent. They couldn’t complete the goal because builders did not want to take on land.

Changchun City sold only 3 pieces of land in 2022, bringing in 780 million yuan in total. In 2021, the city’s public spending budget was 44 billion yuan and revenue from land use rights concessions was 68 billion yuan. The lack of land sales in 2022 left the city facing a big hole in its public spending.

Sources:
1. 51.ca, January 19, 2023
https://info.51.ca/articles/1178169
2. China.com, January 30, 2023
http://house.china.com.cn/2129918.htm#:~:text=%E5%B9%B4%E4%B8%8B%E9%99%8D23.3%25-,%E8%B4%A2%E6%94%BF%E9%83%A8%EF%BC%9A2022%E5%B9%B4%E5%9B%BD%E6%9C%89%E5%9C%9F%E5%9C%B0%E4%BD%BF%E7%94%A8%E6%9D%83%E5%87%BA%E8%AE%A9%E6%94%B6%E5%85%A5,%E6%AF%94%E4%B8%8A%E5%B9%B4%E4%B8%8B%E9%99%8D23.3%25&text=%E8%B4%A2%E6%94%BF%E9%83%A8%E6%95%B0%E6%8D%AE%E6%98%BE%E7%A4%BA%EF%BC%8C2022,%E6%AF%94%E4%B8%8A%E5%B9%B4%E4%B8%8B%E9%99%8D20.6%25%E3%80%82

China is pushing to make consumer spending its next economic growth driver since its exports has slowed down and government infrastructure investment (mainly focused on housing and construction) has become ineffective.

Recently, an Economy professor from Sichuan Agricultural University published an article on how to get people to spend. He argued that it is difficult to get the high income groups and low income groups to spend more, so the focus should be on the middle income people. His suggestion was to impose a tax on the portion above 500,000 yuan (US$74,000) of people’s money in the bank.

In August 2021, another so-called “famous economist” Xu Hongbo from Wuhan University of Technology put forth a similar idea. A tax should be based on the total cash-equivalent of assets including bank savings, cash, gold (both gold reserve and gold jewelry), and money in the online payment accounts such as Alipay and Wechat. Assets below 1 million yuan would be exempt. Then 1 – 1.5 million and above would be taxed as follows: 1 percent for 1.5  to  2 million; 2 percent for 2 to 2.5 million; 3 percent would be for higher amounts, …, with 40 percent as the top tax rate.

Source: China Digital Times, January 27, 2023
https://chinadigitaltimes.net/chinese/692392.html

On January 13, Yingtan City, Jiangxi Province, posted on social media that the county has finished the delivery of social security payments for January. 75,500 retirees of companies received 178.85 million yuan; 13,600 government retirees received 69.09 million yuan; and 137,800 other retirees (residents not working for the government or established companies) received 28.54 million yuan.

People were thus able to calculate the three-time payment structures: 5,080 yuan (US$749) per month for government employees, 2,368 yuan (US$349) per month for company retirees, and 207 yuan (US$31) per month for normal residents. This created a hot discussion on the Internet about the unfair social security treatment based on people’s classes.

Source: Epoch Times, January 16, 2023
https://www.epochtimes.com/gb/23/1/16/n13908521.htm

The Caijing website published an article discussing the phenomenon that banks are creating hurdles to prevent people from paying off their mortgage principle earlier than is stated in their schedule.

The online App of a large state-owned bank told its users that early repayment cannot be handled online and that they need to make an appointment for an office visit. However, this type of appointment has a long waiting time. A customer called on January 3 and got an appointment on June 13. Some other banks also have people wait 3 months for an appointment.

Banks prefer customers to follow the mortgage payment schedule so that they can have the interest create a steady cash flow.

People, on the other hand, prefer to pay off their mortgage earlier because, nowadays, the normal financial investment options in China, such as bank’s saving accounts, mutual funds, hedge funds, etc. have a volatile and lower return than the mortgage interest rate. Thus people would rather pay off their mortgage principle.

Source: Caijing, January 19, 2023
https://estate.caijing.com.cn/20230119/4913830.shtml