Corruption fighters home in on big property owners

Cheating junior officials have been exposed for building up bulging property portfolios, but it is clear they are just the tip of the iceberg

PUBLISHED : Monday, 17 December, 2012, 12:00am
UPDATED : Friday, 21 December, 2012, 2:20pm

Since 2007, when the subprime mortgage crisis emerged in the United States and almost dragged the entire world into a deep recession, some foreign investors have eyed China's property market with growing suspicion.

They have argued that the property bubble will burst spectacularly, sooner rather than later, plunging the mainland into an unprecedented economic crisis.

While official data is not complete and unreliable, some have cited the anecdotal evidence of seeing only a smattering of lights shining at luxury housing estates in major cities at night as proof that most of the units are vacant and unsold, tying up trillions of yuan in bank loans. However, except for a brief dip in 2009, the mainland's real estate market has remained buoyant despite the government's tough and repeated efforts to bring down housing prices.

Now the emergence of the so-called "Uncle of Property" and "Aunt of Property" in the wake of the leadership's new anti-corruption efforts has provided interesting anecdotal evidence of this buoyancy.

Internet users coined the terms to refer to corrupt officials who own dozens of residential and commercial properties.

The first to acquire the name was Cai Bin, a junior official in charge of urban management in the Panyu district of Guangzhou. On October 22 he was sacked and detained on corruption charges after the local authorities confirmed he and his family owned 22 properties, including villas, flats, factories, shops and car parking spaces with a total value of more than 40 million yuan (HK$49.2 million).

Since then, there have been further reports in the state media of more "Uncles and Aunts" of property, implicating officials in Jinan and Rizhao in Shandong, Shunde and Zhanjiang in Guangdong, and Hangzhou in Zhejiang .

Each of them is alleged to have owned more than 20 properties.

These scandals are interesting in several ways. One is that the officials are only junior in rank, yet managed to accumulate a large portfolio of properties.

This prompted state media - including People's Daily - to raise questions about whether such officials are properly monitored.

According to the reports, the officials made little effort to disguise their ownership. In Cai's case, the whistleblower simply compiled the information from the city's property registry.

Ironically for the government's efforts to force mainland officials to declare their assets, Cai reportedly declared the ownership of just two properties on his annual declaration form in the last two years.

Secondly, as many mainland internet users have rightly pointed out, these scandals are merely the tip of the iceberg. If junior officials can manage to build up an impressive portfolio of properties, what about the senior ranking officials - the mayors, governors and party secretaries?

While the "Uncle of Property" may be a new term, Cai is not the first official to have owned more than 20 properties. Trawling through the files over the past few years, one can easily discover that most of the officials arrested and jailed for corruption formerly owned many properties.

Hao Pengjun , formerly an official in charge of coal production and safety in Pu county in Shanxi , appeared to hold the record by owning 36 properties, including 33 in Beijing.

Corrupt officials prefer property investments not only because the market has been buoyant, but also because the options for laundering their ill-gotten gains are limited, particularly for those officials who work in medium-sized and smaller cities. However, it is difficult for them to scoop up a portfolio of properties in their own cities without raising eyebrows. That explains why they prefer to buy properties in big cities such as Beijing, Shanghai, and Guangzhou, where there are plenty of rich people - and corrupt officials - and where someone owning 10 or 20 properties is hardly noticeable.

After the recent spate of scandals involving the "Uncles and Aunts" of property, some analysts have said in jest that the recent jump in property sales in major mainland cities could have been caused partly by other corrupt officials trying to dispose of their properties before they get found out.

While that may be difficult to prove, one thing is clear - these officials are most likely to have acquired their properties with full payment upfront.