China Faces Own Government in Efforts to Cool Housing Boom

In defying four years of official cooling efforts, China’s soaring house prices reveal an uncomfortable truth: government is one of the biggest obstacles to the success of taming the market.

State income is so entwined in the need for rising land prices that policy efforts to try to curb the house market create an inherent conflict of interest.

With one hand on a patchwork of controls aimed at taming record house prices, governments with their other hand are at the same time selling land to developers at rising prices.

Homes in cities such as Beijing are more expensive by some measures than Britain or Japan, a dismal outcome for a central government campaign aimed at making homes more affordable to Chinese. House prices in September rose nationwide at their fastest pace in three years.

“The starting point of local governments is to keep land prices relatively high,” said Zou Xiaoyun, deputy chief engineer at China Land Surveying and Planning Institute, a research unit affiliated to the land ministry. “Governments are not willing to see home prices fall.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza