Beijing calls on pioneer to drive housing scheme

Premier Li Keqiang appointed a key ally on Sunday to the housing ministry at a time when worries are rising about a property market downturn on the mainland which could destabilise the broad economy.

Chen Zhenggao, a former governor of Liaoning province, is now party secretary of the Ministry of Housing and Urban-Rural Development. Chen is widely expected to also replace minister Jiang Weixin, who has reached the retirement age of 65.

Between 2004 and 2007, Chen's political career overlapped with Li's in Liaoning when he was first the mayor and then party secretary of provincial capital Shenyang. Li was then working in the same city as party secretary of the old industrial province before moving to Beijing.

During that period, Li started pioneering efforts rebuilding shanty towns to improve living conditions for the poor.

A similar campaign is part of this year's mini-stimulus package to boost investment and pump up the world's second-largest economy so that it can create enough jobs, which is crucial for social stability.

Chen took over when Li left, and became noted for tearing down crowded old towns and abandoned coal-mining areas for redevelopment.

"A new leader will bring new experience and the affordable housing programme will help support the country's economic growth," said Wang Jun, a senior researcher with the China Centre for International Economic Exchange, a top government think tank in Beijing. "The problem is, where will all the money come from."

The central government aims to start construction of seven million affordable homes this year, including 4.7 million from the redevelopment of shanty towns, the housing ministry announced last week, urging local governments to step up financing support. It will form part of officials' annual political performance appraisals.

The personnel change comes amid a sharp drop in property sales this year, dragging the country's first-quarter economic growth to its slowest pace since 2012.

"Three years after writing about the property bubble debate, we are increasingly worried about a property downturn in China," UBS chief China economist Tao Wang said at the start of her report on Monday.

Some mainland officials are even more worried as spending on everything from infrastructure to health care depends heavily on a strong property market. Once it cools, revenue from land sales will shrink and there will not be enough collateral to borrow from banks.

To stimulate demand, a few cities, including Ningbo in Zhejiang province, Nanning in Guangxi and Wuxi in Jiangsu, have relaxed policies. More are expected to follow suit in the next few months.

Tongling, in Anhui province, said on Monday it would offer tax subsidies - 1 per cent of the property price - to families buying homes of less than 144 square metres.