In China, buy property if you want to mind your own business

Lack of a central land registry ensures investors can keep central authorities off their backs

PUBLISHED : Tuesday, 23 July, 2013, 12:00am
UPDATED : Tuesday, 23 July, 2013, 6:47am

Every mainland investor knows the easiest way to keep the government in the dark about how rich you are is to buy properties scattered about the country.

Despite the real estate boom, property registration remains surprisingly decentralised, spread across local governments, many of which do not share data with central authorities.

The central records that do exist are divided by property type - such as land, buildings, forests, mineral reserves and fisheries - among as many as nine agencies, according to one academic analysis.

So you could own a copper mine in Jiangxi, a dozen apartments in Beijing and 100 hectares in Yunnan, and no one would be the wiser without the painstaking work of mining one database after another.

Corrupt officials have concealed vast property empires. In February, senior Lufeng police official Zhao Haibin was booted out after it was revealed that he owned 192 houses in Huizhou and more in Shenzhen and Zhuhai.

Facing public furore over such scandals, Beijing has finally decided to act. In March, the State Council ordered agencies to launch a centralised property database for four major property types - land, housing, forest and steppe - by next June.

But the process of creating one has proved more difficult than expected, with everything from technical problems to resistance from local officials slowing its implementation. Some experts close to the overhaul admit the deadline will probably not be met.

"At first they thought it would be a simple task: just pull all the data together," said one expert. "But the water is far deeper than they thought."

At first they thought it would be a simple task: just pull all the data together. But the water is far deeper than they thought

Aside from making ill-gotten gains easier to conceal, the lack of such a database has hindered the implementation of a national property tax and made it harder for law enforcers to monitor more mundane crimes, such as selling a house and the land beneath it to different buyers.

Fragmented property registration also makes it harder to do business. To prove his net worth to a bank for loan, for instance, a businessman must obtain registration records from many government agencies, which is time consuming and tricky.

The process has also been slowed by intense behind-the-scenes infighting over who gets final control over the new database, since that agency will hold sway over property controls and land management.

The turf war has been especially fierce between the ministries of Land and Resources and Housing and Rural-Urban Development, the two biggest players in the property market. While a building must be registered with the housing ministry, its property must be registered with the land ministry.

Soon after the State Council set its deadline, the land ministry sprung into action, lobbying to secure a bigger say in the regulation's drafting.

Sun Yinghui , the ministry's director of policy and law, urged his researchers to move quickly to ensure they would "play a central role" in the reform.

But the housing ministry has pushed back, intent to ensure its own control over the database.

A housing ministry official involved in the reform said it was too early to say which ministry would win. "We are still doing many important works and pushing many things forward," the official said. "We are not giving up anything yet."

The centralised property registry has also met strong resistance from local governments. Many have been slow to allow the central government access to their data, citing everything from incompatible software to slow network connections.

Many suspect they are trying to protect officials who bought property with ill-gotten income. Property data has proved to be a particularly effective tool for outing corrupt cadres.

In recent years some whistle-blowers had accessed the housing data base of some city governments and exposed several government employees with huge amount of properties in large cities such as Beijing.

In January, a deputy bank chief in Shaanxi named Gong Aiai was dubbed "House Sister" after her huge property empire was exposed on the internet. She was accused of buying 41 properties in Beijing.

Week earlier, a senior urban-management official from Guangdong named Cai Bin - or "House Uncle" - was sacked after it was revealed that he and his family had bought 22 homes on a modest income.

Professor Sun Lijian, a deputy dean with Fudan University's School of Economics, has said a national database would deal a serious blow to officials parking their wealth in property.

Some in the central government are also worried that pushing too hard for the database may cause officials with property empires to simultaneous dump their holdings on the market and cause a collapse in prices.

Local resistance was so strong that, according to some media reports, the housing ministry was forced to promise that it would keep the database beyond the reach of corruption investigators.

"[The central] government's slow moves have drawn lots of criticism from the public, but they are only trying to achieve better results with a more gentle approach," Sun said.