Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.
The state, has valid legal pretext and a joker in the sleeve: the special interpretation of article 149 of property law. Not a single municipality in China ever honoured the textualist interpretation of the law, in all and every case ever going to court over article 149, the outcome was that the state can't deny the automatic lease extensions, but it leaves municipality the privilege to set conditions.
And yes, Shenzhen municipality was very very happy to resell property sold on 15 and 20 year leases. And people who were previous lease holders were royally fucked because they paid for property with 15 and 20 years leases as much as for a 70 to 50 years lease.
I found these:
>Most of this happened before the property boom began at a national level. So it is those cities that set the early pace in residential property development that have been first to encounter the issue. Wenzhou is one of them. Shenzhen, China’s oldest special economic zone, is another. A few property owners there started experiencing problems about 15 years ago. In that case most were given an option to renew their expired titles by paying 35% of a ‘baseline land value’, calculated on a historic rate far lower than the prevailing market price, Guangzhou Daily has reported.
>https://www.weekinchina.com/2016/04/a-nation-of-homeowners/
I the end, Wenzhou's leaseholders got free extension, but most likely just to shut them up. The govt did not yield to demands on relinquishing the right to set lease extension conditions. More on that in Chinese "ministry of land and resources decision, 23rd december"
I myself think that government's blessing on short term leases, (edit) plus hefty property tax on regular real estate seem to be the most logical way out of China's housing bubble.
I think China will abandon the entire leasing system once they get a national property tax in place. The current system is unsustainable at the local level, and localities need the continuous income a property tax can provide, rather than the windfall of leases every 70 years (if that).
Yes, pretty much it.
Shenzhen been very happy reselling land from all those short term leases under the new sky high prices for at least a decade.
Excerpt: "land user could apply for an extension without usage change if they pay a renewal fee based on the benchmark land price – the initial auction price on the land set by the local government"
Interesting fact FIY: the 2007 property law was the most debated act ever in Chinese legislature, with it failing to pass a number of times. While Chinese legislators are handpicked yes men, they also are quite wealthy people in their majority. Understandably, art. 149 was not on the govt's draft, but was added under the unprecedented extreme pressure from the assembly members.
Will the govt resort to the "nuclear option?" The temptation to solve the money problem in one swoop is just too high.
My coworker was evicted 2 month ago by his landlord in Shenzhen when the landlord suddenly learned that his land lease has expired when the police came to hand him a note without any prior warning.
The party is far from being almighty. There was a huge number of other things that people were betting CCP will not let crash at all costs, but which nevertheless crashed: from currency, to stock market, to rural lending cooperatives (google that, it think their crash had impacted close to 1 in 3 or 4 people,) and on and on
China is no stranger to totally catastrophic financial crashes. Things like 2008 in US happen here every 4-5 years, but people seem to barely notice them.
Before adjusting for inflation, their GDP is at 1994 levels in USD terms. If you adjust for inflation, it's a brutal rollback.
Not only did they stagnate on economic output, they accumulated extreme amounts of debt, heavily debased the Yen, saw their savings rate drop to near zero, and lost their demographics age wise.
They have to perpetually destroy their economy via currency debasement until the national debt is effectively defaulted on to a high enough degree that they regain economic breathing room. The net result of that is vast wealth lost, and a gradual adjustment down in relative terms for their economic standing vs other nations (they've fallen from a top five GDP per capita nation, to number ~20; most likely that down trend will continue at least until they're between Spain and Taiwan in rank).
What debasing? USD/JPY has moved around 110 for 20 years now.
China has kept pumping up its bubble unreasonably so since the mid-2000s. It has a third-world problem compared to the USA's first-world one.
US recorded 4% gdp growth in Q2.