Business / Industries

Rising anxieties for China's property developers

(Xinhua) Updated: 2014-03-31 14:01

China revealed a blueprint of a new-type of urbanization in mid-March to prop up the economy amid flagging growth, with massive building projects of transportation networks, infrastructure and real estate expected from now to 2020.

"The market potential is there as long as China's urbanization continues," said Chen, adding that the hype about oversupply is just a result of a transition from short-term to long-term market equilibrium.

Rising anxieties for China's property developers

Rising anxieties for China's property developers
Tax reform: wait and see

Chinese properties now face at least two swords of Damocles: the gradual replacement of business tax with value-added tax (VAT) and property tax.

With the aim to reduce the tax burden on Chinese companies, VAT will replace business tax nationwide by the end of 2015.

At the moment financial, property and some other sectors have been left unchanged due to complex conditions.

"The construction sector is complicated with multiple transaction links and it would be difficult to conduct the reform, " said Ni Hongri, a researcher with the Development Research Center of the State Council (DRC), a think tank.

It might be better to leave the real estate sector unchanged, Ni said, adding a drop in the business tax rate may also reduce the tax burden.

"If the reform is to be expanded to the real estate sector, a sound package should be in place to reasonably link two different taxation systems as most property projects have long cycles," said Liu Shangxi, a senior researcher with the Ministry of Finance.

A joint report released last week by the DRC and the World Bank pointed out that VAT reform may dent local governments' fiscal incomes and proposed the introduction of a property tax to supplement the loss.

The first step has already been taken. China plans to establish a national real estate registration system in about three years, according to a Ministry of Land and Resources statement on Thursday.

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