Do state-owned enterprises push-up land prices?
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Last week, centrally controlled state-owned enterprises (SOEs) won a series of land bids with record prices in Beijing. This has led people to wonder if these firms are pushing up the price of land.
At Sunday's China Development Forum 2010, Chairman of the Supervisory Board for Key Large State-Owned Enterprises Xiong Zhijun said SOE land bids didn't result in soaring housing prices, according to The Beijing News on Monday.
"It's not the land price that decides the housing price, but the housing price that decides the land price, which is general economic knowledge," Xiong said. He disagrees with the belief that SOEs entering the property industry push up high land prices. "No matter who wins the land bids, there is no relation to ordinary people's housing. The land, which the bidding kings won, is located in the most prosperous district. The price is high by itself."
When asked about "some central SOEs exiting the property market," Vice Chairman of the State-owned Assets Supervision and Administration Commission (SASAC) Shao Ning said if the supply and demand can't be sorted out, then housing prices won't see a big change.
Shao said housing prices are determined by the supply and demand of the property market. If the supply can't meet the demand, the price will no doubt increase.
He said measures should be taken from both aspects of supply and demand to adjust housing prices, especially to restrain investment demand. The bid invitation, auction and listing system of land remising will certainly produce "land kings," simply due to the competitive nature of the game. "No matter who wins the bids, the land itself will become a land king," he said.
"The bid system shouldn't be denied as 'land kings' appear," he said. "It's a good system because it's transparent and competitive. It can also avoid closed-box operations and corruption," he added.
In his opinion, the "land king" phenomenon directly benefits the local government since it increases the local land income. "It's not a bad thing, but the key point is how the local government spends it." He says most of the money should be used in building houses for low-income families.
The SASAC last Thursday said 78 centrally controlled SOEs whose core business is not property must gradually exit the real estate market, although Shao didn't release the detailed schedule at the forum.
According to the SASAC, there are 16 centrally controlled SOEs whose core business involves real estate development. Data show they have a total asset of about 560 billion yuan, which makes up 85 percent of all the centrally controlled SOE assets in the property sector.
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