The recent collapse of the 13-storeyed building in Shanghai should serve as a cautionary tale for the increasingly prosperous real estate market. The list of names, of those behind the venture, released on Tuesday reveals local officials to be involved as shareholders in the construction firm. That should focus public attention on the play of corruption behind the accident.
It is not rare to find abuse of power to be the root cause of many fatal accidents in fields as diverse as construction and coal mining. An alliance of power and capital has become the easiest way for business people to maximize profits at the lowest cost and for the officials involved to get their "dues" for leasing the power in their hands.
In this accident, the second largest shareholder of the real estate development firm has been confirmed to be an assistant to the local township leader. The names of some local government officials are also found to be among the shareholders. Little wonder that a firm with a registered capital of only 8 million yuan was able to secure a housing project worth hundreds of millions.
What was on the grapevine - about abuse of power as a possible factor in this accident - has turned out to be true.
As far as real estate market is concerned, people have even more reason to believe in trade-offs between power and money having a role in this accident. It is not a coincidence that the real estate sector is publicly acknowledged as a hotbed for corruption even by the central government.
As is common knowledge, some real estate developers are just brokers. All they do is to make connections and fix deals between the land department, urban development planning department, banks and construction companies to meet on paper stipulations such as showing at least 30 percent of the capital for the project.
A number of officials, including a former Beijing mayor, have been nabbed on charges of corruption for involvement in trade-offs between money and power at the instance of developers.
It would be no exaggeration to say that abuse of power has played a big part in the prosperity of the real estate market.
The Shanghai government needs enough resolve to lay bare the truth behind this accident. Every government official involved must be punished.
That alone can undo the damage the building collapse has done to the credibility of both the government and real estate market.
This accident is a reminder that we cannot expect a healthy real estate market in the absence of tighter controls and supervision by a mechanism that breaks the corrupting connection between developers and officials.
It is time for governments at all levels to act forcefully, and the sooner the better.
(China Daily July 3, 2009)