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Time for a road trip? It's cheaper to fly

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NEWS - China Transportation

Tuesday, 07 December 2010 09:48


One of the widely recognized aspects of China's modernization process in recent years has been the fast development of the highway system. Twenty years ago, there were virtually no highway in China. Now China has 65,000 kilometers of highway and will exceeds that of the US in two or three years.

But I have a love-hate relationship with China's highway system after taking to the road many times. To drivers, China's highway system is probably the world's most expensive with "here toll, there toll, everywhere toll toll."

For example, transporting a large container from Guangdong Province to the Beijing-Tianjin area involves paying toll fees of somewhere between 4,000 to 6,000 yuan ($600-900), depending on tonnage. This actually makes transporting the same container from Chicago to Beijing-Tianjin area via sea freight shipment even cheaper. When moving things around the country is more expensive than moving things halfway around the globe, you know there got to be something wrong.

One doesn't have to drive on highways for long to notice that the system is obviously inefficient. Many highways in China don't see much traffic during the day.

While Chinese can feel proud that our country is the king of the highways, it is quite another feeling to consider that the steel, concrete and labor that go into highway construction will have to be ultimately paid by the vehicles that go through, and there just aren't enough of them.  That means a high toll rate is inevitable.

Now I understand highways are expensive to build and the investment has to be recouped via toll collection. OK, you pay for what you get. But how much of the collected toll revenue goes toward paying back highway construction loans is very much in doubt. Has the whole thing become a scheme for meaningless job creation?

In China, collecting toll fees is a very well paid job, and in some cases pays better than a full professorship. I assume receiving cash and handing out a ticket doesn't need much education, right? It certainly can't be more stressful than migrant workers pouring concrete on the road under the sun.

And then there are those obvious wastes and excesses at the toll booths. China not only has the longest mileages of highway in the world, it also has the world's most beautiful and most expensive toll booths. Every time I drive by a toll booth and see a nice office building nearby for the so-called management staff, I can't help thinking of the AC/DC song "Highway to Hell!"

China's highway system is also Balkanized in a way that adversely affects inter-province commerce. Since the administration power of highway systems lies at the provincial level, each province builds its own road and its own toll booths. This has created bizarre situations at highway provincial borders where two respective toll booths belonging to each province lie literally within a few hundred meters of each other, each collecting its own money. The ensuring traffic jams don't matter as long as the cash registers ring.

Traffic jams caused by toll booth delays are notorious in China. According to traffic law, when the line of waiting traffic is over 200 meters long and when all lanes at the toll booth are not fully open, drivers have the right to pass free. I have certainly run into such situations many times, and I have never enjoyed such a free ride.

And then there are the real free riders, whose costs have to be ultimately paid by ordinary citizens. For people in military vehicles, ambulance, fire-engines, and other men and women putting their life on the line to protect us citizens, I have no grudge against them saving a few yuan on the road. But for those high-ranking government official free riders who proclaim they are citizens' civil servants, I say, "We hold these truths to be self-evident …"

A radio host in the US once said, "Thanks to the Interstate Highway System, it is now possible to travel across most of the country from coast to coast without seeing anything."

The statement is bitterly sarcastic. But it is indeed true that it is possible to travel across the country in the US without paying anything. Will this ever be possible in China?



China Starts Trial Property Tax to Cool Market

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NEWS - China Law

Friday, 28 January 2011 12:00


SHANGHAI—China announced details of a long-awaited property tax in two of its largest urban centers, but the move intended to crack down on speculation and curb rising prices that are fueling public anger was relatively mild and analysts said it would have only a limited impact on investment.

The trial tax, the closest thing yet to the style of tax levied annually on residential property in countries like the U.S., will be applied differently in Chongqing and Shanghai, apparently to see which one works best, before being rolled out across the country.

The tax comes after the country's cabinet on Wednesday raised the minimum down payment on second-home purchases to 60% from 50%, and imposed limits on home purchases as part of efforts to cool the overheated real-estate sector and rein in inflation.

"The tax, by itself, is not very harsh," said Remy Chan, managing director of CBD Commercial Investment Management, a 3 billion yuan ($456 billion) private-equity property fund in Shanghai. "But together with the new limits on home purchases and higher down payment for second homes, it shows the government is determined to rein in speculation."

The tax, which comes into effect Friday, "can guide residents toward more rational housing consumption" and "promote social equality," the Ministry of Finance said Thursday in a statement issued jointly with the Ministry of Housing and Urban-Rural Development and the State Administration of Taxation.

"Levying property tax on residential housing can help reasonably adjust income allocation and promote social equality," the statement added. It will be expanded to other cities "when the time is ripe" it said, without giving a timetable.

Late last month, Premier Wen Jiabao said the property-cooling measures announced so far hadn't been implemented well enough and prices had yet to meet his expectations. Property prices rose 0.3% in December from the previous month, and 6.4% from a year earlier. Property prices slowed for the eight months to December on an annualized basis.

Chongqing Mayor Huang Qifan said the city would levy a real-estate tax on villas owned by individuals—usually luxury, stand-alone homes—and on newly purchased high-end homes at three rates: 0.5%, 1%, and 1.2%, depending on market transaction prices.

Three to five years after a purchase, the tax may be based on the appraised value of the property, he said. In addition, the city will levy a tax on second homes newly bought by non-Chongqing residents who don't own companies or aren't employed by any company in the city, a move that apparently targets speculators.

Separately, the Shanghai government said it would levy a temporary 0.6% real-estate tax on homes and may cut the rate to 0.4% for properties whose transaction prices are below certain—unspecified—levels.

A statement by Shanghai's housing department said the tax would apply to second homes newly bought by Shanghai-resident families or to first homes newly bought by nonresident families.

"It's a mild plan overall, and the primary impact will be psychological rather than economic," said Michael Klibaner, head of research at Jones Lang LaSalle China,."We finally have some clarity. It's a surprise that the tax will be in effect tomorrow, but the tax rate came in line or slightly lower than the recent rumors," Mr. Klibaner said. He said it seemed the aim was to support end-user demand, but it likely will have a limited impact on investment demand, as the tax is lower than the investment yield of about 2% in Shanghai. The progressive tax in Chongqing and flat tax in Shanghaitaxes show that the government wants to experiment before rolling out a real-estate tax to other cities, he said.

One of the intentions of the tax is to provide a recurring source of income for local governments to reduce their reliance on income from land sales, which encourages high prices.

Both cities said the tax revenue would be used to support public-housing construction. However, Mr. Huang, the Chongqing mayor, said the trial tax "carries more symbolic significance" in reforming people's consumption habits and promoting better income allocation, and may not generate much fiscal revenue in the near term.

He estimated that the tax could bring in around 150 million yuan of fiscal revenue this year, only a fraction of the 100 billion yuan that the city needs to invest in public housing construction over the next three years.

He also played down public expectations about the short-term impact of the tax, saying it can only curb speculation and property prices "to some extent".

"Maintaining a good local property-market order isn't something that can be achieved overnight. Rather, it's a complicated project," he said. "Nobody believes that the real-estate tax can hit the Achilles' heel" immediately by pushing down property prices, he said.

Analysts have said that if the tax doesn't push down housing prices, it will lead to even more public resentment. Some also raise the possibility of more rampant speculation in cities that have yet to be included in the trial program.

The government currently charges a 1.2% annual tax on 70%-90% of the value of commercial properties. The commercial real-estate tax is largely based on the cost of developing properties, excluding the cost of the land, industry observers have said.

China introduced a series of measures last year to rein in property-price rises, including limiting home purchases, raising down-payment requirements and twice raising interest rates. Analysts say a real-estate tax could help stabilize the market.


China property prices rise more-than-estimated 12.4%

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NEWS - China Real Estate

Thursday, 10 June 2010 17:36

June 10 (Bloomberg) -- China’s property prices rose at the second-fastest pace on record in May, showing little sign yet that the government crackdown on speculation will work to avert an asset-price bubble.

The 12.4 percent gain compared with a record 12.8 percent increase in April from a year earlier, the National Bureau of Statistics said in a statement its website. The data series, covering 70 cities, began in 2005. The value of sales slid 25 percent.

“So far the property tightening measures are mainly cooling transactions” rather than prices, said Xiong Peng, a Shanghai-based analyst at Bank of Communications Co., the nation’s fourth-largest lender by market value. “A property tax is the other shoe that has yet to drop.”

Officials may introduce a trial property tax after already tightening sales rules for developers, raising some down payment requirements and restricting loans for multiple-home buyers, according to state media. China’s benchmark stock index is down 21 percent this year on concern a slowdown in property sales and construction, along with Europe’s debt crisis, will damp the nation’s growth.

First Slowdown

Sales in Beijing, Shanghai and Shenzhen, the nation’s wealthiest cities, fell as much as 70 percent in May from the previous month and land sales for residential development projects in 70 Chinese cities fell 14 percent, the official Shanghai Securities News reported earlier this month.

An index tracking 34 real-estate companies has plunged about 28 percent this year, the worst performer among five subgroups of Shanghai’s stock benchmark.

Sales by China Vanke Co., the nation’s biggest publically traded property developer, dropped 20 percent in May from a year ago, and Guangzhou R&F Properties Co.’s contracted sales last month shrank 48 percent on year, according to the developers’ stock exchange filings.

Bank Loans

“These exceptionally low transaction volumes are partly a result of banks’ unwillingness to lend and also the result of buyers taking a step back” to wait and see what the government’s next measures may be, Michael Klibaner, head of research for Jones Lang LaSalle in China, said earlier this week.

Besides industry-specific measures such as requirements for larger down-payments for some homes, the government on May 2 raised banks’ reserve requirements for the third time this year to contain overheating risks after first-quarter economy expanded at the fastest pace in almost 3 years.

China’s housing market is “prone” to a bubble because of immigration to the nation’s cities and high savings, according to economists at Barclays Capital. Chinese savers lack the breadth of investment and financial options available in developed countries, and U.S. policy makers have pushed their counterparts to help develop more options.

“The government’s recent measures to cool the housing market focus on limiting investment and increasing the supply of public and low-cost housing,” Barclays economists Peng Wensheng and Chang Jian wrote in a June 7 report. “This represents a regime shift in housing policy” and more measures are likely to come, they wrote.

Prices May Tumble

Prices may tumble between 20 percent and 30 percent in coming quarters, according to the Barclays analysts’ projections. The impact on the economy will be cushioned by rising public housing construction, they wrote.

Investment in real estate rose 38 percent to 1.39 trillion yuan ($203 billion) in the first five months of this year, after a 36.2 percent gain in the January-April period, according to the statistics bureau.

Property investment accounts for about 10 percent of gross domestic product and construction work consumes half of the nation’s output of steel and 36 percent of the aluminum produced, JPMorgan estimates.

Besides industry-specific measures such as requirements for larger down-payments for some homes, the government on May 2 raised banks’ reserve requirements for the third time this year to contain overheating risks after first-quarter economy expanded at the fastest pace in almost 3 years.

Property Construction

Property sales by area rose 22.5 percent in the first five months to 302 million square meters (3.25 billion square feet), the statistics bureau said today. The pace is compared with an increase of 32.8 percent between January and April. The area under construction rose 72.4 percent from a year earlier to 615 million square meters, the statistics bureau said.

For the full year, property sales may shrink 30 percent from 2009, Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co., said before today’s release.

“China’s property market is one of the top concerns of global investors as transactions have tumbled,” Jing said. “About 50 sectors in China, especially the steel, cement and aluminum industries, are closely tied with property-market growth.”


China not ready to end support for property, CBRC’s Li says

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NEWS - China Real Estate

Friday, 04 June 2010 17:00

June 4 (Bloomberg) -- It’s not yet time for China to reduce or stop policy support for the nation’s real estate industry, said Li Fuan, an official with the China Banking Regulatory Commission.

“Real estate in China is far from being at the end of its development and we are far from the point where we no longer need to support the industry, where we need to reduce or stop support,” Li, head of the commission’s banking innovation department, said at a forum in Beijing yesterday.

Concerns among investors that China will introduce a property tax and other policies to curb home prices fueled a 30 percent fall this year in an index tracking 34 real estate companies traded in Shanghai. China has already limited loans for third-home purchases and tightened down payment requirements, aiming to cool a market where growth in property prices topped 10 percent for three straight months.

Real estate “will be an important industry that continuously supports China’s economic growth for the next 10, 20, 30 and even 40 years,” Li said. The real estate industry needs as much as 60 more years of development before living standards nationwide can be brought to a “harmonious” and “well-off” level, he said.

Shanghai’s index of property stocks fell 0.12 percent as of the 11:30 a.m. mid-day break today, while China’s benchmark Shanghai Composite Index declined 0.2 percent. The benchmark has dropped 22 percent this year.

Property Prices

Property prices in 70 Chinese cities rose by a record 12.8 percent in April from a year earlier after climbing by 11.7 percent in March and 10.7 percent in February, according to government data. The price gains spurred concerns that a record $1.4 trillion of loans extended last year to combat the effects of the global financial crisis were causing asset bubbles.

Premier Wen Jiabao, in a speech to the country’s annual parliamentary meetings in March, pledged to crack down on property speculation.

China’s tax bureau yesterday announced minimum rates for pre-paid land taxes. The minimum rate for eastern China was set at 2 percent, the rate for western China was set at 1 percent and the rate for central and northeastern regions of the country was set at 1.5 percent, according to the State Administration of Taxation.


Google ‘Confident’ About Further Growth in China, Executive John Liu Says

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NEWS - China IT/Telecom

Wednesday, 27 April 2011 11:42

Google Inc. (GOOG), which pulled its Internet search engine out of China last year, said it’s “confident” of growing in the country under new Chief Executive Officer Larry Page.

The company sees more “upside” in China, John Liu, Google’s head of sales in the world’s biggest market for Internet, said at a conference in Beijing yesterday. Google founders Page and Sergey Brin know China “very well,” he said.

Google is aiming to boost revenue from Chinese customers in display advertising and export marketing as the Mountain View, California-based company has failed to keep pace with Baidu Inc. in China’s search-engine market. Page, who took on the CEO role April 4 and succeeds Eric Schmidt, is ramping up spending on hiring and marketing as he faces rising competition from rivals Apple Inc. (AAPL) and Facebook Inc.

Liu, in charge of local operations since 2009, is negotiating with the Chinese government about online map services, and is seeking to increase adoption of Google’s Android software for phones in the country.

Google last month said the Chinese government is disrupting its Gmail e-mail service and disguising the blockage as technical issues on Google’s part. China’s Foreign Ministry spokeswoman Jiang Yu called that claim “unacceptable.”

That friction followed Google’s decision to shutter its search-engine service in China last year to avoid complying with the government’s rules on Web censorship. Since the March 2010 move, Chinese users of Google search have been redirected to an unfiltered site in Hong Kong.

Censorship Rules
Google in July was able to renew its Internet-service license in China through 2012, even after shuttering its Google.cn site in China and redirecting users to a Hong Kong site. The company had said it was no longer willing to comply with online censorship rules on topics such as Tiananmen Square crackdown in 1989 and Tibet independence.

Google accounted for 19.2 percent of China’s search market by revenue in the first quarter, declining from 19.6 percent three months earlier, according to research company Analysys International. Baidu’s market share rose to 75.8 percent from 75.5 percent, according to Analysys.

A March 4 opinion piece in the official People’s Daily, the mouthpiece of China’s Communist Party, compared Google with the British East India Company, whose sales of opium in the country was the root of two 19th-century conflicts.

China’s tax authorities have begun investigating three local Google affiliates for alleged offenses, the Economic Daily reported on March 31. Google said that day that it’s in “full compliance” with Chinese tax law.


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