Property reform short-lived in the face of vested interests

PUBLISHED : Saturday, 28 August, 2010, 12:00am
UPDATED : Saturday, 28 August, 2010, 12:00am

Bai Ri Wei Xin (Hundred Days' Reform) is what the mainland media have been calling Beijing's recent attempt to cool the property market.

It is a reference to a tumultuous period more than 100 years ago.

In 1898, the country was licking its wounds from the Opium War and the humiliating defeat by Japan in the First Sino-Japanese War. The much-vaunted Chinese fleet had been sunk by a nation that had long been considered inferior. The public was appalled and the stubborn ruling conservatives were embarrassed.

The young Emperor Guangxu decided to act. On June 11 that year, he ordered a series of reforms and appointed several supporters to strategic positions in the government. His hope was to modernise the country while keeping his throne.

The sweeping reforms included a modern education system that focused on science instead of Confucian texts; a constitutional monarchy instead of an absolute monarchy; industrialisation; and shake-up in the military.

But because of a lack of real power in the court and insufficient detail about the reforms, the effort gained little headway and met strong resistance from the conservatives. The reform threatened not just their ideology but their personal interests.

Backed by the conservatives, Empress Dowager Cixi engineered a coup d'etat on September 21, putting an abrupt end to the 104-day reform.

The emperor was put under house arrest within the Forbidden City until his death nine years later. Cixi took over as regent.

Six of the reform's chief advocates had their heads chopped off in a public market.

The bloody failure killed any hope of reform among the elites. Instead, rebellion became the dominate mood, leading to the subsequent overthrow of the Qing dynasty in 1911.

Today, the media, critics and netizens are comparing Beijing's attempt to rein in the property market with this tragic moment in Chinese history.

On March 6 - less than 24 hours after Premier Wen Jiabao sternly pledged to curb the precipitous rise in housing prices - three state-owned enterprises grabbed three pieces of land in Beijing at record-high prices.

On April 19, the State Council issued an order to cool the property market and, for the first time, held provincial officials responsible for skyrocketing housing prices. All but 16 central state-owned enterprises are barred from the property market.

Banks tightened loans to developers. Major provincial governments tightened home mortgages and pledged support for subsidised housing, which would make homes affordable for ordinary people. Developers were fined for leaving land idle.

All these measures held down the volume of transactions but not prices. With the 2007 bust-and-boom experience fresh in their minds, both buyers and developers are right to wait and see how serious Beijing is.

But in fact the much-talked-about property tax has not materialised. There has been no concrete plan on the development, funding and distribution of subsidised homes. And the majority of the local governments have not handed in any land-use plans for subsidised houses.

If there was still a tug of war between the market and Beijing, it was long gone by the end of July. Developers began to cancel whatever nominal price cuts they were offering.

'Clients are calling in every other day for a quicker delivery of design blueprints,' said the head of an architectural firm working for various listed mainland developers.

Even the state-owned sector is back to business as usual. This month, China Communications Construction, which has been barred from the property market, confirmed negotiations to acquire a state-owned property company to get an entry ticket into the market.

Last week, the Shanghai government's listed flagship in Hong Kong, Shanghai Industrial, used HK$5.8 billion in cash to acquire the control of five million square metres of land in first-tier cities such as Shanghai, Beijing and Qingdao.

Compared with these moves involving real money, the recent pledge by Vice-Premier Li Keqiang and the State Council to 'continue' to combat property speculation all sounds too hollow. Meanwhile, developers are busily preparing for the 'Golden September Silvery October' peak season of house sales.

You see why netizens are calling it the Hundred Days' Reform. It's not just about the quick death of reform but more importantly the apparent impotence of leaders in the face of vested groups.

Emperor Guangxu faced Cixi and the conservatives. Beijing faces the mammoth web of political and commercial interests behind the property market - the regional cadres, the banks, the private developers and the state-owned enterprises that have their feet deep to the market and have their backers at the top.

To be seen as the weak and clueless Guangxu is the last thing the current leaders need. The party leadership is due for a reshuffle in late 2012 and the backstabbing has already begun.

As the political interests at stake balloon, the result can only be the introduction of draconian administrative measures. Why? It's easy and quick.

One-off measures such as a loan ban require only an order from the top, but long-term solutions demand lots of negotiations and trade-offs at all levels. Just imagine getting the central government, the regional bureaucrats and developers to agree on funding for subsidised homes.

It's not surprising that a rumour that property prices will go down by 30 per cent was circulating in Beijing this week. Some members attending the National People's Congress there have even called home to warn their subordinates.

Is it the last resort to talk down the market, or is it for real? My bet is it won't take very long before we know.