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Shirley Yam

I am going to write about the mainland property market again. 
Not that I expect any fundamental changes. But there is nothing more revealing about the country's corridors of power than this. 
The latest example is the high-profile leak about the introduction of a property tax in Shanghai.
On May 15, the Shanghai Securities News carried this exclusive news on its front page. Quoting a person close to the Shanghai government, it provided great details about the taxing criteria, percentages and exemptions.
Any mainland tax expert will tell you that in order to maximise effectiveness and  minimise abuse these three crucial elements have to be kept confidential until the very last minute.
But in this case, not only were the critical facts given out, they came from a government source and were published in its media mouthpiece. 
In China's tightly controlled media, there is zero chance that the revelations were the result of the endless pursuit of truth by a bright journalist.
Rather, the story was part of a 'grand show', to quote an insider. 
The backdrop of the show is the upcoming leadership reshuffle of the Communist Party, scheduled for autumn  2012.
To some of you, that may sound like a century away but not for those in the bureaucracy. Regional cadres are already elbowing for a seat at the top - the nine-member Politburo Standing Committee. 
Among the contestants is the Shanghai Party Chief Yu Zhengsheng,  a princeling who will turn 67 in 2012; his Chongqing counterpart Bo Xilai,  another princeling who has recently thrown some top gangsters and policemen into jail; and Wang Yang,  the Guangdong party head who is close to  President Hu  Jintao.
Whether they will get to the Standing Committee is no longer just a matter of who he or his father is, but also how well they have done.
With the cooling of the property market as the top political priority, this is the area for a candidate to win his stripes. 
Introducing a property tax is the way to score high and here is the reason. 
A month into its cooling campaign, Beijing has largely resorted to two measures - tightening the screws on property developers and mortgage borrowers; and a threat of more draconian measures should prices go up further.
The logic of the tightening is that squeezing their purse will force developers to sell more flats and be more cautious in land bidding. 
That's partly true. But a more honest explanation is that banks, especially the big players, are among the few who still listen to Beijing. 
However, tightening liquidity nips demand and supply indiscriminately. 
The more long-term solution is a comprehensive scheme on  subsidised housing and a property tax that targets speculators. 
Neither, particularly the introduction of a property tax, can be done without the full support of local municipalities. 
It is therefore not surprising to insiders that a few days after the State Council issued the cooling order, Bo Xilai's Chongqing was the first province to jump out and talk of a property tax.
In contrast, other cities that have announced cooling measures - Beijing, Shenzhen and  Qingdao - have focused on mortgage tightening and so far they have remained silent on the property tax.  
To outdo Chongqing,  Yu's  turf of Shanghai needs not only a more concrete tax plan but also a louder drum roll. 
A scoop in the Shanghai Securities News - a national financial daily - that was widely circulated by both local and international media, has successfully stolen the limelight. 
It also helps in generating fear and talking prices down. 
There will be more talk of decisive action to combat speculators from Chongqing, Shanghai and Guangdong in the coming months.
The real question is whether all this talk is just hot air. 
Is the ongoing power race going to generate any material property tax regime? 
To answer this, I refer you to a chat that a developer told me he had about property taxes with an official from a city. 
It was late and the two had already finished a bottle of wine.
Developer: 'So how real is the talk of a property tax?'
Official: 'This wine is much better than the one we had last month. Where did you get it?'
Developer: 'You are such a wine expert. Most people can't tell the difference ... Ah, mmm ... Should I get prepared for the [property] tax thing?'
Official: 'Hey, pal, stop asking questions ... The more you ask, the quicker it gets real.'
Translation [given by the developer for me]: 'The more questions you ask, the more answers I have to fetch for you, the more the details get worked out, the more concrete the plan gets, the less grey area for us and the greater the damage to you.' 
In short, some form of property tax will be introduced by local governments to scare the price down. 
But it is likely to be dotted with ambiguities allowing frontline officials much room to  manoeuvre. 
After all, more than 77 per cent of the country's 2009 government reserve used for infrastructure came from land sales. 
In the case of Shanghai, it's 90 per cent. Property-related revenue accounts for 25 per cent of its fiscal income, not including indirect income.
Individual local cadres may not care about how to get bills or debts paid without a booming property market, but how about this: The property market enters into a depression. Property prices dive. A local developer collapses. Risky lending by banks is exposed. Bankers point to pressure from government officials. The developer admits bribing the officials ...
Of course, you are not going to read about the ambiguity of any new rule in the state press. 
It will be all about taking action, cooling off prices and bettering people's livelihoods. 
On the eve of a race for power, that's the most you can get.




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Bo Xilai

High-profile property-tax leak all part of the 'grand show'