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New policy stresses Hukou
Published on: 2011-02-21
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In another chapter of China's battle against the sky-rocketing prices of real estate nationwide, many Chinese cities are taking up arms by implementing their own policies to limit property buying.

However, these opening salvos were met by harsh criticism by those who view the forced residence registration approach as squeezing out non-locals from the property ladder.

Authorities in about 10 cities, including Shanghai and Guangzhou, will prohibit locally registered citizens who already own two or more homes, or those without a local residence permit, or hukou, who have owned at least one home, from buying more houses, the Xinhua News Agency reported Saturday.

Additionally, non-local registered families who cannot produce documents certifying they have paid for social security or income taxes in these cities for one year are banned from buying property.

Nanjing and Harbin joined Chengdu, Qingdao, Changchun, Nanning and Guiyang over the weekend in releasing similar policies.

Beijing issued even tougher policies Wednesday by banning home purchases for those who cannot show social security or income tax payments in the capital for five straight years.

Last December, the same rules were applied in Beijing to determine whether non-locals could apply to own license plates for new cars.

Wang Zhenyu, a deputy director of the Public Decision-making Research Center with China University of Political Science and Law (CUS), told the Global Times that the moves indicate a huge reversal in reform of the hukou system.

"The new home-purchase policies will only inflate the value of hukou and will breed fraud. There is a possibility for more non-locals to enter bogus marriages with local people and then get divorced to evade policy restrictions," he said.

Wang sent a proposal Friday to the Legislative Affairs Office of the State Council, China's cabinet, requesting changes to the new housing and car purchase restrictions.

"The cities impose stricter access to people without local hukou, which is discriminative and against the Constitution that stipulates that all are equal the law," he said.

The household registration system, implemented in 1958, divides people into rural and non-rural households.

Citizens with rural hukou are not entitled to the same social benefits as their urban counterparts, even if they live and work in cities.

People with urban hukou enjoy comparative advantages in terms of job opportunities and social benefits.

Voices in favor of reforming the hukou have swelled as many believe the system is not compatible with China's rapid urbanization, and that reform will allow migrants to seek better wages and living conditions in cities.

The curb on home purchases came after the State Council ordered late last month that local governments must take strict measures to restrict house purchases if prices rise too fast.

China has implemented a series of measures since last year, including asking for higher down payments and raising loan rates, as well as bans on mortgage loans for third homes, to tame the rising property price.

However, new home prices climbed in January from a year earlier in 68 of the 70 major cities tracked by the National Bureau of Statistics, with 10 of them registering double-digit growth.

Prices rose 6.8 percent from a year earlier in Beijing and 1.5 percent in Shanghai, the bureau said.

Zhang Jingang, an agent with Homelink Real Estate in Beijing, told the Global Times that both property prices and rent have increased slightly since the new policies were rolled out.

"House prices remain high, and we have seen fewer clients," he said, predicting that business will not be overly reduced in the long run, as some agents offer facilitation such as making illegal tax documents for non-qualified buyers.

Questioning the new policies, Ren Zhiqiang, CEO of a real estate developer, Beijing Huayuan Group, wrote on his microblog that the housing-price inflation is the result of faulty land-supply policies and that it makes no sense to blame consumers for buying more houses.

"China has intended to improve its urbanization, but why should it blame people with rural hukou for buying homes in cities?"

He Bing, a vice dean of the CUS Law School, told the Global Times that the new housing-purchase restrictions are simply local protectionism that imposes restrictions on consumers from different places.

"A house is a commodity like any other goods. It is against free-trade rules to impose restrictions on non-locals. To rein in the rising property prices, fiscal measures, including levying housing property tax and estate duty, may prove more effective," he said.

However, Li Daokui, an economist at Tsinghua University and an adviser to the central bank, hailed Beijing's new property policy as "moving in the right direction," although he believed the requirement to provide five years of social security or income tax was too strict and recommended it be dropped to three.

Wang of CUS suggested that more government-funded affordable housing and low-rent apartments be provided.

"Only in this way can the demand for properties be reduced, and thus cool down the heated housing market at the roots," he added.

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