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The unchecked surge of real estate invest-ment by large State-owned enterprises (SOEs) not only sabotages the central government’s efforts to prevent housing bubbles but raises questions about the SOEs.
Chinese policymakers should act immediately to rein in these new elephants who are stirring up more trouble in the overheated property market.
In spite of all the government’s tough talk against excessive home price hikes, the record land price for residential housing in Beijing was broken twice on Monday thanks to aggressive bids by State-owned enterprises.
The weeklong postponement of the land auction seemingly served to save policymakers, who were explaining to the National People’s Congress how they would prevent housing bubbles, from trouble.
Yet, the jaw-dropping results only underscored how differently these cash-rich State firms think about housing prices. It seems that all the measures that the government adopted to raise capital requirements and leverage restrictions have so far worked only to discourage private property developers while doing little to restrain the appetite of State firms for a bigger market share.
The record land sales on Monday certainly cast doubts on a previous official claim that not a single cent of the country’s 4-trillion-yuan stimulus package has flowed into the real estate sector. Worse, they fueled expectations of more price hikes to undermine government efforts to prevent housing bubbles.
The hunger for profit shown by SOEs also calls for a review of their actual roles in the economy. A profit-driven company does not deserve the monopoly status that SOEs have required for the “strategic roles” they are supposed to play in the national economy.
