| Report urges drastic moves to rein in economy |
SHANGHAI, Apr. 27 -- China must take drastic action, including boosting the property tax rate, stopping sales of under-construction houses and gradually cutting export rebate rates, to rein in the almost overheated property market and the boom in exports, a think tank of China's top planning body has said in a report.
China should consider policies to prevent excess supply of money flowing into the real estate industry and exports, the research institute under the National Development and Reform Commission said in a report published in China Securities Journal yesterday.
"The central and provincial governments should abandon the belief that real estate is a pillar industry for economic growth," the report said.
The report suggested that the government should implement a property tax, even on vacant apartments, and slap a "huge profit tax" on developers. Tax rates on the earnings of house transfers are advised to be shored up to 50 percent from the current 20 percent, the report said.
Average housing price in Shanghai has rocketed from 4,010 yuan (US$519) per square meter in 2002 to 7,038 yuan so far this year, according to the city's Housing, Land and Resource Administration Bureau.
The price also has jumped in Beijing, Jiangsu, Zhejiang and Guangdong provinces in recent years, which has led to many complaints and a widening of the income gap between urban and rural areas, the report said.
"Property developers should be banned from selling apartments under construction to cut the flow of more money into the market," the report said.
As a common practice, property developers sell apartments even before construction starts. House buyers are asked to pay first for a reservation as many developers pretend that flats could be sold out soon.
They then collect all the reservation money to buy an area for the building and to pay for the construction cost and the interior decorations.
Some housing speculators may also grab the chance to reserve an apartment first and mark up the price to sell it to others.
The report also suggests that the government should not allow a person to buy more than one property.
China is facing a fast growing economy with GDP rising 11.1 percent in the first quarter this year. The yearly GDP is predicted at 10.9 percent, the fourth consecutive year that the country's economy rise has surpassed 10 percent, according to the National Bureau of Statistics of China.
Excessive development in property and export sectors contributed most to the drastic hike, the think tank said in the report.
"In the export sector, policies should also be changed to narrow the trade surplus step by step," the report said.
The government needed to speed up the lowering of most export tax rebates to 5 percent in the next two years to trim the trade surplus, the commission said.
China reduced the rebates taxes on 76 steel products to 5 percent and canceled those on another 83 steel products on April 15. The textile rebate was also cut to 11 percent from 13 percent last year.
The commission also suggested that China should use gradual yuan gains as well as higher interest rates and loan curbs to slow the fast-growing economy. Monetary policies also need to remain stable in the next five years.
The trade surplus soared in January, jumping 67 percent from a year earlier to US$15.88 billion, and climbed to US$23.76 billion in February, compared with only US$2.45 billion in February 2006.
However, it dropped to US$6.87 billion in March, according to the Ministry of Commerce.
The expanding surplus puts China under pressure due to the escalation of trade tensions with other economies and also raises alarm that it may stoke the fixed asset investment and fuel inflation.
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