Elite Chinese Politics and Political Economy

Government forces officials to sell real estate

So, it has come to this. Local governments are now quite desperate about the real estate markets because of course their friends and relatives are real estate developers. Governments all over the country are wracking their brains trying to find ways to increase real estate demand. In some places, the government is using its own funds to buy up housing for future use. In less affluent localities, however, more desperate measures are used. In Hanting in Shandong, the local mayor simply ordered all government units to help sell apartments on behalf of local developers. Failing that, they are pressured to buy apartments out of pocket. That's public service for you! I think this just illustrates the intimate connections between local officials and local developers!

By the way, the paperback edition of my book is out. I know some of you have been waiting for the more affordable version to come out. It is now available!



山东寒亭：区政府下红头文件要干部替开发商卖房
来源：南方都市报 　2009-03-31 08:46:31 　作者：

　　

　　山东寒亭要求每人至少卖一套,完不成任务将被扣工资

　　本报讯 据《经济参考报》报道 商品房滞销，区政府下发红头文件要求副科级以上干部替开发商卖房，并制定了具体考核办法。记者近日在山东省潍坊市寒亭区采访，发现当地很多干部对区政府下达的卖房任务感到苦不堪言，怨声一片。

　　干部卖房政策“初见成效”

　　今年1月14日，寒亭区政府下发了《关于促进房地产业加快发展的意见》（寒政发「2009」3号），明确要求全区副科级及以上现职干部，每人至少销售一套住房，完不成任务的，按比例从所在单位已认定的全年招商引资额中扣减。

　　随后不久，寒亭区房产局制定出台了《关于机关干部购买（引荐）商品住房的考核认定办法》，要求全区副科级及以上干部每人至少购买或引荐购买一套商品住房，时间为2009年1月14日至6月30日；考核认定办法还规定，购买或引荐购买75平方米/套（含）以上商品住房的，认定为一套，不足75平方米/套的，按0.5套认定；并对完不成任务的如何从所在单位招商引资额中扣减做出详细规定；并同时表示，对考核结果每月予以通报。

　　对于这项任务，寒亭区负责人在大会上再次强调，要强化责任，狠抓落实，每月评比通报，完不成的要扣工资。

　　记者了解到，在区政府的强力推动下，副科级以上干部卖（购）房政策初见战果，1月中旬到3月20日，已有53个区直部门单位所属副科级及以上干部购房或引荐购房306套。当地媒体称“寒亭区促进住房消费增长见成效，房产市场呈现强劲反弹势头”。

　　有单位要求卖不出就自己买

　　一些干部动用了各种关系完成了卖房任务，但是依然有很多干部在为完不成卖房任务发愁。

　　“卖房子不像卖水果、卖烟酒那么容易，真愁死人了。”一位不愿透露姓名的干部对记者说，自从文件下发以来，许多机关干部无心工作，整天都在想办法卖房子，可现在房地产市场低迷，引荐给谁？

　　该区一名干部说，春节后到现在，他揣着区里的红头文件，四处“吆喝”卖房，“文件都翻得起了毛，却没找到一个买家”。记者接触的另一位副科级干部反映，单位要求推销不出去就自己买，但几年前寒亭区就建了一个区机关小区，很多部门都给干部职工盖了住宅楼，几乎所有的副科级以上干部都有住房，没必要再买一套；另外买一套房至少需要20万元，个人就是想买一般也买不起。

　　面对刚性的卖房任务，为了不影响本单位在区里的考核，区直不少单位想出各种办法。一些强势部门甚至考虑在所属干部实在完不成任务的情况下，由单位出资购买；相对弱势的部门则出台“高压政策”：工作可以放一放，但卖房任务不能放，任务完不成的扣发工资。

　　“媚商”行为损害政府形象

　　寒亭区政府出台这项政策是否合规合法？寒亭区房产局副局长辛冠华始终回避记者提出的问题。

　　在副区长徐方吉的办公室，得知记者的采访意图后，徐要求记者“赶紧出去，不要在我办公室呆着”。在记者再三坚持下，徐方吉说：“房地产是石区长分管，我只是分管房产局，这个政策的制定我没有参与，也不清楚！”

　　而记者从寒亭区政府网站和区政府办公室都看到，房产管理在徐方吉分管工作之列。

　　中国政法大学谭秋桂教授认为，政府下红头文件强制推销商品房是“媚商”行为，此举固然能博得房地产开发商的欢心，却是以滥用行政权力为代价的。地方政府一旦逾越了法治与公平，形象将受到极大损害。

Hu Jintao comments on China's fx reserve

At a meeting between Hu Jintao and Guangdong delegates to the NPC session this year, Hu was quoted as saying:

"现在许多国家说中国好，希望中国出来，坦率地讲我们还是发展中国家，你别看我们有近2万亿的外汇储备，拿13亿人除，一个人还有多少啊。所以，我们确实需要把自己的事情办好。”

"Now many countries are saying that China is good and hope that China will emerge (to help them), but honestly we are still a developing country. Don't over estimate the fact that we have almost 2 trillion dollar in our foreign exchange reserve. If you take that amount and divide it by 1.3 billion people, how much per head is that? Therefore, we truly need to conduct our own affairs well."

Okay, what do we learn from this?

Chinese commitment to help bail out other countries is nearly zero. Perhaps a few billion will be thrown at the IMF or World Bank, but beyond that, there will be little. There were some currency swaps recently between China, Japan, South Korea, and Hong Kong, but I view them as largely symbolic gestures than genuine help. Also, part of conducting China's affair well is to continue to expand China's export markets. Earlier in the session he said to the Guangdong delegates that:

"欧美市场不行了，咱们还可以开发东南亚、南亚、中东、海湾、非洲国家的市场，巩固和开拓国际市场。"

"If the European and American markets don't do well, we ca develop the markets in Southeast Asia, South Asia, Middle east, Gulf states, and African states, consolidate and pioneer international markets"

Eh well, I guess all of the above except for the resistant South Asian market! Clearly, beyond doing everything possible to maintain stability, China does not have a fundamental interest in facilitating re-balancing; this process will have to be pushed forward by falling consumption from the US and Europe. As Michael Pettis pointed out recently, the Chinese stimulus package mainly builds up even more capacity, which exacerbates the imbalance. Although there are components which seek to increase domestic consumption over the long run, they are relatively minor parts. (I do give them credit for reducing fixed asset investment by 300 billion RMB though, but only to give to the large SOEs through a 'strategic revaitalization plan'! Great job! deciples of Oscar Lange)

Why is the CIC buying Big Four state bank shares?

As we know, the CIC through Huijin has been buying up shares of the listed state banks (BOC, CCB, ICBC, BOCOM) since late last year in the A share market and possibly the H share market. A colleague of mine asked a very good question? Why? What policy purpose does it serve?

Well, certainly the simple answer is that CIC wants to prop up the prices of the banks shares in both Shanghai and Hong Kong. The effect on the market is not just the direct support, but also expectation effect. It creates a winning trade consistently since traders know that below a certain level, the CIC will intervene.
I think the main reason for this intervention is to prevent a large book loss on the CIC's balance sheet beyond the losses from overseas investment. That's mainly a self serving reason. The public policy reason is that all of the banks will need to recapitalize in the near future due to rapid increases in lending. One way of course is to do so through share issuance. State share holding of these banks would not have to be as diluted the more these shares are "worth" on the market. This is de facto a back channel way for China's foreign exchange reserve to turn into funds for the stimulus, through bank recapitalization.

Li Rui is at it again

In this revealing NYT article, we find out that former Mao secretary is at it again. Since being purged by Mao and suffered horrible ordeals during the Cultural Revolution, Li Rui has been the unrelenting critic of regime policy and a sort of a conscience of the CCP regime. He is now calling for deficit reduction and more democratization. In terms of democratization, he has been singing the same tune for decades, to little avail. On deficit, however, I think Li Rui should stick to what he knows best. The current deficit, though historically high in absolute amount, is relatively small as a share of GDP (3.33%). Moreover, what he perhaps does not realize is that local governments are on a whole broke and cannot finance the stimulus, so the money would have to come from banks and central debt issuance.



Party Elders Press for Checks on China’s Stimulus Plan


New York Times
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By JONATHAN ANSFIELD
Published: March 3, 2009

BEIJING — As China’s government doles out $584 billion to stimulate its ailing economy, critics inside and outside the Communist Party have pressed for details about the murky spending plan and demanded the right to follow the money.
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A cluster of liberal Communist Party elders recently wrote to President Hu Jintao and the rest of the party leadership, seizing on the economic troubles and the need for more accountability to promote democratic reforms.

“We very much endorse the central authorities’ investment of 4 trillion renminbi” — $584 billion — “to drive the economy,” they explained in the letter, dated Jan. 20, a copy of which was obtained by The New York Times.

“At the same time, we are extremely worried that the privileged and the corrupt will seize this opportunity to fatten themselves, damage the relationship between the party and the people, and intensify social conflict.”

They pressed for checks and balances on the recovery program. More sweepingly, they urged that state media be freed from censorship and that courts allowed to operate without interference from the ruling party, reforms the party has repeatedly rejected in the past.

The stimulus plan has led to calls for greater transparency from other quarters as well.

A Shanghai-based lawyer, Yan Yiming, has threatened to sue the National Development and Reform Commission, China’s de facto central planning agency, unless it publishes an inventory of items approved for financing. Mr. Yan’s crusade attracted legions of supporters online.

The government is working hard to look responsive, though without releasing much new information. On Sunday, a senior central planning agency official said the government would publicize project details as the plan was approved.

A party-run liaison group called the Chinese People’s Political Consultative Conference has also sought to use the country’s annual parliamentary session, which opens on Thursday, as a forum to show that the government is listening to demands for greater openness.

The chief drafter of the letter by the party elders was Li Rui, 91, a secretary to Mao Zedong before being felled in a 1959 purge. Other signatories included a retired propaganda minister, Zhu Houze, and a publisher, Du Daozheng, along with 13 other aging members of the elite.

Beyond the stimulus, a defense lawyer, Zhang Sizhi, one of the elders, said it was also fair to describe their letter as a vision of reforms vital for the party to endure in the long term.

“The greater the difficulties,” the elders said, “the greater the need for democracy.”

The government has vowed to spend its way out of the economic slump through public works projects, subsidies and tax breaks. It is also trying to speed up social reforms like universal health care.

But the details have remained sketchy. In November, China rushed out its stimulus plan with no public scrutiny, scant details of the spending breakdown and none of the acrimonious debate that slowed action in the United States.

The central government is financing less than one-third of the package, leaving local governments, banks and private enterprise to finance the rest. The mandate from Beijing is to “ensure growth” and “expand domestic demand.”

In their letter, the elders said they feared that the open-ended mandate would set off a binge of uncontrolled spending by regional and local interests, leading to waste and corruption. China spent years before the recent crisis trying to rein in freewheeling local governments and state-backed business interests.

Already, there are signs of a spending spree. Banks doubled their lending in January compared with the same month of 2008, state media say.

Some securities analysts estimate that loan recipients, mostly state-owned firms, funneled as much as a third of new loans into stock market trades, which may help explain a surge in the Shanghai Composite Index this year despite the deepening gloom. To track the loans, regulators have asked banks to submit account records.

The elders behind the letter amassed political clout in the 1980s, as rehabilitated reformists serving progressive party leaders. But those leaders were later purged, and the deadly Tiananmen Square crackdown of 1989 ensued. Two decades later, their agenda of accelerated democracy remains a distant dream.

The party leadership has not responded to the letter, Mr. Li’s son said Tuesday.

One of the elders, 80-year-old Du Guang, said the call for democracy had become even more relevant during the economic downturn. He said he was skeptical of the party’s measures to supervise the stimulus spending.

Mr. Du also criticized the focus on public works projects instead of the country’s weak social services network. “You have to look at how to expand demand in the long term,” he said. “Social spending is more important than building railways, expressways and other basic infrastructure.”