Source: 智本社(ID:zhibenshe0-1)
Author: SD, Chi Society president
Title: Visual China
Fiscal taxation is an important indicator of China’s macroeconomic trends.
Every time the central level of tax reform has profoundly changed the general direction of China’s macro economy.
In the early days of reform and opening up, the “packaging system” replaced the “big pot rice”, activated the local enthusiasm, released the social potential, and the local economy jumped.
In 1994, the tax-sharing system replaced the “contracting system” and solved the central financial crisis. The contradiction between the central government’s financial affairs and the power of the central government has become increasingly prominent. The central government holding the financial power has opened the curtain of infrastructure investment, and the financial shortage has started the real estate economy.
Now, in October 2019, the fiscal and taxation relationship of the central government was reformed again. The State Council issued a plan to promote the reform of the central and local income division after the implementation of a larger tax reduction and fee reduction.
This reform plan aims to increase local income, “to alleviate financial difficulties” and enhance local autonomy. Specific content:
One is to maintain a stable ratio of VAT ‘five-five sharing’. When the reform of the camp was increased in 2016, the State Council issued a “Transition Plan”, which changed the original VAT central 75% and local 25% to 50% of the central and local governments. Now, this “Promotion Plan”The time was clearly defined as “five-five sharing” and continued to be stable for local blood transfusion.
The second is to “adjust and improve the VAT refund and tax sharing mechanism”.
The third is to “post-moving the consumption tax collection link and steadily planning the place”.
This means that the consumption tax (10,618 billion domestic consumption tax in 2018) will be allocated to the localities to increase local fiscal revenue.
This reform has had a huge impact on the real estate industry. This reform is easily overlooked by people in the industry and the property market.
The previous article on real estate of Zhiben Society formed the judgment logic of the top-level design “Dwelling in the house”, the external market “China-US trade war” (financial opening), and the internal policy “land finance”. The conclusion is :
“Since 2019, after 20 years of marketization and 10 years of financialization, China’s real estate has completed the historical mission of stimulating economic growth, and land financing is in a passive exit phase.”
From the central decision-making level, the status of real estate in the national economy has declined. At this year’s two sessions, housing and real estate issues have not been as separate as in previous years. At the same time, the report’s expectations for real estate are only “smooth development.”
From the perspective of the external market, with the advancement of Sino-US trade wars and China’s initiative to open up to the outside world, especially financial opening, curbing real estate prices and preventing asset price risks, is a key step in the smooth integration into the global market. .
In this way, the central government grasps the overall situation and sets up a high-voltage line, and requires real estate to “stable words”: stable prices, stable prices, and stable expectations. At the same time, the right to control is delegated to the local government, and the “one city, one policy” and “the city policy” are promoted.
With the monetization of the shed, the currency flow to the property market was stopped, the high turnover mode of the housing enterprises was ended, and the real estate tax was counted down. The real estate era is gradually drifting away.
But from the perspective of local governments, real estate is still the mainstay of many local economies, as well as an important source of government revenue, and the dependence on land finance is still very large.
So, this general direction is one step, that is, how to solve the local government’s dependence on land finance.
Now, this fiscal tax reform, re-division and clarification of the central government’s fiscal allocation, taxation tends to local, increased landThe industry has started to slow down by cracking down on foreign debts and ending the high turnover of real estate.
In short, “the economy goes to real estate, and real estate is defoamed.” The general trend is to prepare for financial opening.
The core issue of this process is still there, that is, the local government’s land finance and debt problems.
The introduction of real estate tax is now counting down. Although this tax revenue is allocated to local governments, the latter is hard to say how motivated. The main reason is that the land transfer fee is a one-time charge of 70 years, and the real estate tax is a long-term mechanism – the money is too slow to cover the land financial gap.
With the land transfer income of 5.2 trillion in 2017 as the standard, the real estate tax should exceed the land transfer income; the tax rate should be above 2.5% when the area is free, and the tax rate should be above 4% when the area is free. Therefore, if the exempted area exceeds 12 levels and the tax rate is within 4%, the real estate tax cannot replace the land sales income. [2]
Now, the tax reform policy was introduced to alleviate the financial pressure of local governments and cooperate with local “one city and one policy” regulation and control policies to reduce the urgent need of local governments for housing price increases and land transfer fees, thereby achieving asset curtailment. Foam purpose.
So, under the high line of financial openness, the smaller the fiscal pressure on local government land, the lighter the debt burden, and the less demanding the rise in housing prices.
3. The logic of the post-real estate era
The Chinese economic cycle is the real estate cycle.
The evolution of China’s real estate and economic cycle:
The impulse to develop China’s real estate industry began in 1994 after the tax-sharing reform, and the local government’s “poor thinking” of fiscal revenue. In essence, it is the result of a compromise between the central and local financial powers.
As in the United States that year, it was because of the “lack of money” that the road to “state-owned land” financing was thought of. The difference is that the United States is facing the financial crisis of the federal government to sell land, the state governments are exempt from debt, and China is the central government to solve the financial crisis through the tax sharing system, the local government is trying to collect a 70-year land transfer rent (the ownership has not been transferred) ).
This tax-sharing reform has great resistance. In order to meet the local financial requirements, the central government allocated land transfer fees to the localities. At that time, there was no urbanization.Rising, real estate has not yet been marketized. Most people still have no concept of real estate economy, and they are not aware of the huge potential of land transfer fees.
In 1997, affected by the Asian financial turmoil, the difficulty of attracting local investment was more difficult. The provinces in the interior were extremely difficult to finance, and they began to find ways to seek land finance.
The second year of real estate market reforms opened the road to icebreaking.
After joining the WTO in 2001, China’s economic take-off and urbanization have taken a big step, and the corresponding investment heat and market demand have risen. Together with the rapid increase in the central bank’s foreign exchange holdings, the monetary easing and the growth of state-owned commercial banks have become The real estate economic cycle laid the foundation.
In 2003, the “Provisions on the Sale of State-owned Land Use Rights by Bidding, Auction and Listing” was issued, marking the official launch of the wild horse dislocation model in China.
From 1998 to 2008, it was a decade of real estate marketization.
From 2008 to 2018, it was a decade of real estate monetization.
In the past ten years, with the support of wide currency and wide credit, the development track of real estate has also evolved from a market-oriented road to a financialization road. Local governments rely on land finance, commercial banks rely on real estate credit, urban investment companies and state-owned real estate companies rely on land and credit capital, and asset management companies rely on wholesale capital on top of real estate mortgages, which rely on direct property arbitrage. .
However, this decade of real estate is accompanied by a clear regulatory cycle –
In 2009, real estate was rebounded by the stimulation of wide currency;
In April 2010, the “National Ten Articles” was launched, and in September of the same year, the “National Five Articles” were released;
In January 2011, the “New Country Eight Articles” was launched;
In February 2013, the “New Five Articles” was launched;
In 2015, “330 New Deal” and “930 New Deal” were launched;
In 2017, the “317 New Deal” was launched.
The real estate market experienced small cyclical fluctuations in 2010, 2013 and 2017. However, after each regulation, real estate has risen rapidly, so the popular real estate “the chamber pot theory”.
In particular, in 2016, housing prices in first-tier cities doubled, followed by third- and fourth-tier cities. Driven by the monetization of sheds, the historical mission of stimulating economic growth and land financing has entered a state of peak performance.
However, from the second half of 2018, real estate has jumped out of the logic of “more and more ups and downs”, and its growth logic is also fundamentally changing – the economy goes to real estate, and real estate is defoaming.
This means that the era of China’s real estate cycle is over and the era of rapid housing price growth is over.
However, the metabolic screen in real estate does not mean that house prices fall and investment declines, nor does it mean that real estate is not a pillar industry.
The inertia of real estate above the land finance is particularly large, occupying a huge volume in the national economy. More importantly, in the local economy, land and real estate support the entire currency, national debt, national credit and national wealth.
China’s move from a local economy to an open economy requires a shift in the way the national economy grows. “Economic de-realization” is just one of the (important) links. The pace and determination of this transformation is related to the overall economic growth rate and competitiveness, and matches the pace and pressure of financial openness.
From the data released by the National Bureau of Statistics, GDP in the third quarter of 2019 increased by 6% year-on-year, which was worse than the market expectation of 6.1%. It was recorded in 1992 after 6.2% in the second quarter of this year. The quarterly minimum growth rate since [3].
The market expects that China’s GDP growth rate is likely to enter the “5” era. Economist Ren Zeping once said: “The new 5% is better than the old 8%.” But the question is, if 5% is not “new” but “old”?
For example, when the economic growth rate is down, but the economic structure has not yet been transformed, the technology upgrade is insufficient, and GDP is still falling into the 5% level of old kinetic energy. What should we do then?
At this time, the decision-making level is likely to continue to increase the investment in old kinetic energy and invest heavily in real estate to maintain GDP growth.
From the data released by the National Bureau of Statistics, although the GDP growth rate has declined, one of the data is very eye-catching, that is, the scale and growth rate of real estate investment.
From January to September, the national real estate development investment was 9.8008 billion yuan, a year-on-year increase of 10.5%. Among them, the residential development investment was 721.4 billion yuan, and the growth was as high as 14.9%.
Real estate investment is still so large and high, indicating that China’s real estate is still at a high level of investment. This is a strategy for China to maintain economic growth during the current and transitional period.
So, after the real estateOn behalf of the real estate, the metabolism screen, but the real estate has not disappeared, real estate investment will remain large in the short term or at some stage.
It can be expected that in the post-real estate era –
First, Overall, house price volatility is suppressed, and the probability of both rising and falling is small, mainly in long-term sideways and small volatility;
Second, Locally, the price differentiation is more obvious, the prices of first-tier cities and urban core areas are relatively stable, but the population with a net outflow is likely to decline;
Three, In the short term, the scale of real estate investment will still be large, and it is still the backbone of the local economy. Only the mission of real estate has driven growth from the past and has become a decline in the economy.
If large-scale investment continues, real estate production capacity will increase substantially, so that it will not take long for China to face the problems of overcapacity, overstocking and excessive leverage. The price has been “capped”, and the last thing I want to see is the re-monetization.
In the local economy, land is the core asset of national credit. In the process of transitioning to an open economy, the national economy needs to cultivate new credit assets.
For example, New York, London, Tokyo, Hong Kong, Shanghai, Shenzhen, these major financial cities are high-priced cities. Real estate and land are the backbone of the financial system and the most important collateral for financing. However, the difference is that New York and the City of London use a large amount of government bonds and other financial derivatives as collateral, and they are less dependent on real estate than Shenzhen and Shanghai.
If housing prices in Shenzhen and Shanghai fall sharply, the financial assets of the two cities will shrink significantly and even trigger financial risks. In New York, London, and Tokyo, there have been many financial crises. Why are they still able to maintain the status of the financial city?
In an open economy, currency, treasury bonds, insurance, stocks, securities, derivatives, and land values all reflect the overall strength of the national economy, such as technology, manufacturing, innovation, and institutions. Money credit itself is also a country. The embodiment of economic power (do not deny the excessive financialization of the United States in certain periods).
So, in the post-real estate era, the economy is going to real estate to the old capacity, and the real estate to the bubble is the inferior demand. Only by supplying new capacity, new technology and new system can the national economy be in the global economic tide. Cast a solid anchor for credit.
References:
[1] Introduction to Business Nature, Richard Cantillon, The Commercial Press;
[2] Can real estate tax replace land sales income, Xia Lei, Huang Shi, Ze Ping macro;
[3] How to judge the current Chinese real estate market, Yi Xianrong.