In contrast to Shenzhen, the neighboring city of Hong Kong considers it a crime to make fake statements when applying for a public house, and violators face fines up to HK$50,000 ($6,430) or six months in jail.

Chen Aipin, secretary-general of the Shenzhen Housing Research Institute, said one of the issues is that the government-funded houses can be traded in five years.

"It leaves a lot of room for making a profit, so no system can prevent some of the applicants providing fake information," he told Nanfang Daily.

The average housing price of the city exceeded 18,900 yuan per square meter last year, but the first batch of government-funded apartments for the low-income offered in 2008 were priced between 4,000 to 5,000 yuan per square meter.

Though the price has not been decided yet for the ongoing second batch, the big price gap and possible profits from trading five years later are attractive to applicants.

About 35 percent of the 8,148 initial applicants have so far been found unqualified, official figures show.

The list will continue to receive public scrutiny until Jan 14, according to the Shenzhen Bureau of Housing and Construction.