Others News
- Fitch: New regulatory campaign healthy for China's sizzling property market
Date: 13-Apr-2007 Sources: (People's Daily)
Fitch Ratings said on April 11 says that the new regulatory campaign recently launched by the Chinese government to examine irregularities in the property sector will be beneficial in structuring a sustainable and less volatile property industry in China.
Eight Chinese ministerial-level government agencies, led by the Ministry of Construction, announced in a statement on 3 April that they will launch a joint campaign to regulate the property market in an attempt to ultimately rein in soaring property prices. Inspections will begin late this month and run through March 2008, targeting irregularities in property projects such as illegal advertising, price manipulation, swindling and tax evasion.
More importantly, the inspections will also cover the approval process for property development and property sales, in particular, the possible corruption and collusions between local officials and property developers.
Price hikes in the urban residential property market fuel the central government's worries of a real estate bubble and potential discontent of the general population. As a result, the Chinese government has already strengthened its monitoring of the property sector and has implemented a series of regulatory measures, with the aim of stabilising the residential property market and curbing speculative sentiment in large cities.
However, despite the austerity measures, residential housing prices, except those in Shanghai, continue to rise. The housing sales price index for 70 large-and medium-sized Chinese cities increased by nearly 6% yoy in 2006, and several large cities like Beijing and Shenzhen reported a double digit jump for newly built residential properties, according to the National Development and Reform Commission of China. The nonfeasance and misconduct of some local officials, to a great extent, was blamed for this situation.
Fitch notes that the participation of the National Audit Office and Ministry of Supervision in the campaign reflects the firm resolution of the central government in cracking down on these misconducts as well as the aim of pushing local governments to strictly enforce the policies of cooling down the property market.
Although the implications from the regulatory campaign will need further analysis, Fitch believes that these efforts will exert benign influence on the development of the Chinese property market from a long term perspective.
Fitch views that the larger, publicly listed, Chinese property companies may have relatively better corporate governance and internal control, and thus, may be better positioned to benefit from a stricter enforcement of the laws and regulations.
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