IN FOCUS
By Dincy Adlakha

China's new property tax eyes great reforms

On 23 October, the Standing Committee of the National People’s Congress (NPC) authorized the State Council to impose property tax in particular areas. Xinhua reports that the first of its kind tax is aimed to rationalize the housing consumption, utilize the land resources intensively and economically, and also to guide the country’s property market to steady development. According to the new tax, all residential, non-residential, and commercial properties will be taxed, however, the lawfully-owned rural houses in the areas will be exempted.

What led to the new tax reforms?
First, the nature of China’s property sector. When the People’s Republic of China was established under Mao Zedong, private ownership of land was not allowed. The land was consolidated under strict governmental ownership. However, a few land reforms brought in by Deng Xiaoping opened land for ownership by firms and individuals as well. The local governments sold out land to new buyers and gained revenues for their decreasing treasuries through these sales. No property tax has been imposed on personal property since, despite many experiments launched in various cities. The lack of regulation and increased state support and loans for emerging strong firms led to the disparity in terms of land ownership. Firms like Evergrande have enlarged their bubbles through such support. Yet, many common citizens are unable to buy property due to surged prices.

Second, the prolonged emphasis on the need for property tax. According to a Wall Street Journal report, President Xi Jinping has been emphasizing on expanding the property tax experiments to deflate the bubble that the property industry has blown over time. The report further states that Xi aims to impose a nationwide property tax which is being resisted by the political elite of China. “We should actively and steadily promote the legislation and reform of real estate tax, and do a good job in the pilot work,” Xi wrote in Qiushi, Chinese top policy journal. Currently, there is no tax on property owned by individuals but annual tax is levied on commercial properties. Reportedly, seminars and policy discussions on the tax started as early as May last year. The current context of China’s property sector increased the urgency and necessity of the tax in recent months.

Third, the larger alignment to the ‘common prosperity’ project. The tax is introduced not merely to re-correct the property sector but is part of the larger picture of ‘common prosperity’ as proposed by President Xi Jinping. The government has previously imposed huge crackdowns on the tech industry in China, including Alibaba and Didi firms. The private education sector of China has also received bans and regulations. These steps in different industries are forwarded with the vision of reducing social inequality and elevating the entire population of China towards prosperity, collectively.

What will the new tax lead to?
First, the property tax will give local bodies a new source of income. The fiscal revenue earned could then be utilized for public services and infrastructure development. According to Lu Wengxi, a chief analyst at property agency Centaline, the collected tax and its judicious utilization will lead China closer to its common prosperity goal. This also reflects confidence in Beijing and its capabilities to manage the great risks and potential hits visible in the property sector.

Second, real estate developers may face a slow turn as their costs for holding properties would increase. But, if the tax limit is low, it will also open up the housing sector to the market. However, an increased price might be foreseen.

Third, the reallocation of public and private funds from the real estate sector to other capital sectors will rise. Investments will increase in other long-term markets rather than the bloated property sector.

However, some analysts write for Fortune that the tax will render ineffective like its predecessor experiments. Even if the tax collection succeeds, it shall shock the economy more without giving much time to investors for re-investing.

References
“China to pilot property tax reforms,” Xinhua Net, 23 October 2021
Grady McGregor, “Evergrande and property speculation force Beijing to consider an idea that’s radical in China: Taxing real estate,” Fortune, 26 October 2021
Ryan Woo, Liangping Gao and Samuel Shen, “Explainer: Is China finally ready to roll out a property tax?,” Reuters, 19 October 2021
“Warning of Income Gap, Xi Tells China’s Tycoons to Share Wealth,” The New York Times, 07 September 2021
Stephen Bartholomeusz, “China’s radical shift could burst its property bubble,” The Sydney Morning Herald, 26 October 2021
“China to pilot levying property tax in selected cities,” Global Times, 23 October 2021
“China expands property tax trials in next step of ‘common prosperity’ drive,” The Financial Times, 25 October 2021

IN BRIEF
By Avishka Ashok and Keerthana Nambiar

INTERNAL
China starts inoculation for children aged between three to 11
On 26 October, Global Times reported that China had extended its inoculation programme to include minors aged three to 11. In the previous week, Hubei, Hunan, Hainan and Zhejiang provinces started vaccinating the minors as the COVID-19 cases in the country continued to increase incessantly. The schools will also begin sending their students to the vaccination venues in batches since all hospitals do not take up adolescents for the vaccination. The Chinese government has approved two doses of Sinopharm and Sinovac vaccines for the age group. (“Vaccination for children aged 3-11 launched across China amid rebound of COVID-19 cases,” Global Times, 26 October 2021)

China releases new draft regulation on registration of online user account
On 26 October, the Cyberspace Administration of China began gathering public opinion o a draft regulation on the management of internet account user names. According to the newly drafted regulation, “While users can decide on their screen names, they must provide authentic identity information when registering accounts with online platforms.” The new regulation also seeks to restrict users from taking up names that resemble the Communist Party of China and other related governmental organizations and institutions. It also makes it compulsory for minors to have the consent of their guardians to create an online user account with real-name registration. (“China mulls real-identity registration of internet user accounts,” Xinhua Net, 27 October 2021)

TECHNOLOGY
Chinese physicists launch the world’s fastest programmable quantum computers
On 26 October, South China Morning Post published a report claiming that China launched the world’s fastest programmable quantum computers. According to the report the Chinese physicists have built two quantum computers that supersede their competitors from the West. The research team says that the light-based Jiuzhang 2 holds the capacity to calculate in one millisecond and has detailed the team’s findings in two papers published in academic journals Physical Review Letters and Science Bulletin. Zuchongzhi 2 is a 66- qubit programmable superconducting quantum computer that is claimed to be 10 million times faster than the world’s fastest supercomputer. Quantum computers are limited to the Chinese military and their application in civilian sectors are limited. (“China launches world’s fastest programmable quantum computers,” South China Morning Post, 26 October 2021)

INTERNATIONAL
China-Afghan Taliban wrapped up their first high-level engagement in Doha
On 26 October, the Chinese State Councilor and Foreign Minister Wang Yi concluded the first high-level dialogue with Amir Khan Muttaqi, acting foreign minister of the interim Afghan Taliban government at Doha. According to the Chinese foreign ministry, both China and Afghanistan have agreed to set up a “liaison mechanism to discuss future exchanges” reported Global Times. “China respects Afghanistan's exploration of a pattern that suits its own conditions, and China also respects the interim government's national implementation of policies,” announced Wang Yi. Muttaqi said, “the new government has realized actual governance of Afghanistan, and the country highly cherishes peace after 45 years of war. Good relations with China are important to Afghanistan, and the country is working to realize its own security and promote regional peace.” The meeting served as a platform for mutual respect and recognition between the countries. (“Wang Yi meets Afghan Taliban in Doha,” Global Times, 26 October 2021)

Japan’s Defence Minister expresses concern over the China-Russia naval exercise
On 26 October, Japan’s Defense Minister Nobuo Kishi spoke on the China-Russia naval flotilla around Japan accelerating the list of security challenges in the region. According to the Kyodo news agency, five Chinese ships and five Russian ships sailed together passing through the Tsugaru Strait and Japan’s main island of Honshu going to the Pacific Ocean. Kishi said, “This is the first time we have confirmed activity on such a large scale and over such a long period,” and further declared that "We believe this was a show of force toward Japan.” (“China-Russia flotilla displays "show of force": Japan defense chief,” Kyodo News, 26 October 2021)

Xi Jinping and Emmanuel Macron held first talks after the AUKUS pact
On 26 October, Chinese President Xi Jinping held the first telephonic conversation with French President Emmanuel Macron after the formation of defence alliance between US, Britain and Australia. China Central Television (CCTV) quoted Xi Jinping during the press conference, “recent international events have once again shown that France is correct to advocate the strategic autonomy of the EU.” He announced that Sino-French relations will induce stability in the “world situation.” President Xi further suggested on improving the understanding and mutual trust between China and Europe which has been tense over the human rights issue in Xinjiang and Hong Kong. President Macron assured that, “France…. Hopes to strengthen coordination with China in the G20 Leaders’ Summit in Italy and the UN Climate Change Conference in Glasgow.” According to CCTV, Macron hoped on approving the China-EU delayed investment deal. (“Xi Jinping and Emmanuel Macron speak for first time since Aukus alliance was announced,” South China Morning Post, 27 October 2021)

Chinese Ambassador in India holds conference to refute accusations of genocide
On 26 October, the Chinese Embassy in India and the regional government in Xinjiang jointly held an online conference titled “Xinjiang is a wonderful land." The Chinese Ambassador said: “Facts are not to be distorted. Achievements of Xinjiang's economic and social development as well as human rights are there for all to see.” The online meeting was attended by over 100 Indians belonging to the academic, media and political communities. The Chinese ambassador recalled the increasing population in Xinjiang, the education index, the improving quality of life and the standard of living and the growing GDP in Xinjiang. He used these parameters as evidence to prove that there was no genocide committed against the Uyghurs in the region. (“Online conference held by Chinese Embassy in India, Xinjiang regional government to discuss truth in the region,” Global Times, 27 October 2021) 

Chinese Premier addresses ASEAN Summit and calls for negotiations on South China Sea issues
On 26 October, the Association of Southeast Asian Nations commenced the online summits under the Chairmanship of Brunei. The summits will include ASEAN’s dialogue partners such as China, Japan, South Korea, India, the US, Australia and Russia. On the same day, Chinese Premier Li Keqiang attended the online meeting and made statements on behalf of the People’s Republic of China. He urged the ASEAN member countries to accelerate the negotiations for the Code of Conduct in the South China Sea. He also pledged China’s support in establishing a study to identify the areas for cooperation and enhancing the ASEAN-China Free Trade Area. (“Premier Li calls for closer cooperation on SCS, economy with ASEAN,” Global Times, 26 October 2021)