Chinese parliamentary sessions 2014

Why Premier Li Keqiang avoided property price pledges in work report

PUBLISHED : Thursday, 06 March, 2014, 11:09pm
UPDATED : Friday, 07 March, 2014, 4:01am

The property market was a perennial focus of work reports delivered by Wen Jiabao when he was premier.

During his decade-long tenure, National People's Congress attendees grew accustomed to hearing Wen criticise developers and pledge action to cool the overheated housing market.

Premier Li Keqiang, however, departed from that practice in his first address to the legislative body on Wednesday.

For the first time in eight years, the closely watched government work report contained no specific commitment to "regulate property prices" or to "regulate the property market". Li said: "We will regulate differently in different cities in light of local conditions, increase the supply of small and medium-sized commercial and joint-ownership housing units, curb demand for housing for speculation and investment purposes and promote sustained and healthy development of the real estate market."

The language was seen as signalling a policy break from Wen, whose efforts to rein in property prices fell far short of public expectations. During his two terms as premier - covering 10 years - the prices in major cities rose fivefold or more.

Li Jingguo, a property researcher with the Chinese Academy of Social Sciences, said the central government appeared to be on the right track. "The huge difference from city to city requires the government to adopt different policies for different cities," he said.

But others accused Li of sidestepping the issue to avoid a property market downturn and allow local governments to continue to squeeze revenue from land sales. "Bubbles have built up in Chinese property markets and government intervention is absolutely necessary," said Yuan Gangming, a research fellow at Tsinghua University's Centre for China in the World Economy.

Bubbles have built up ... and government intervention is necessary
Yuan Gangming, economic expert

"Li did nothing because he needs fiscal income generated by land sales. This will prompt the further rise of the property market," Yuan said. "He might be making an even bigger mistake than his predecessor."

Just days before stepping down last March, Wen rushed out a package of strict, but controversial, cooling measures.

Prices rose during Li's first year in office. Those for new homes in the 70 biggest cities rose an average 0.49 per cent month on month in January, against a 0.51 per cent rise in December.

Although property developers in Hangzhou, Zhejiang province, slashed prices last month, deputy housing minister Qi Ji said similar cuts were unlikely to be seen elsewhere.

"Our investigation showed the price cut was a one-off phenomenon," Qi told a panel discussion during the Chinese People's Political Consultative Conference. "All those houses were immediately bought out by frenzied investors."