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China should not rely excessively on the real estate sector for economic growth. This is according to a report from the Chinese Academy of Social Sciences.
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The Chinese Academy of Social Sciences dispatched a research group to the US in June to study the subprime mortgage crisis. Researchers have now released a report, suggesting adjustments to the property market, and also warning of excessive dependence on the real estate industry to drive the economy. With a large portion of local government income deriving from land transfer fees, the report is pointing out that this practice could dramatically raise the costs of materials and bring down economic competitiveness.
The report said the US subprime crisis provides important lessons, adding that Chinese authorities should do more to curb inflation in the property market, as well as control lenders' risks. This would involve banks taking strict precautions against any falls in the quality of loans and irresponsible transfer of risk. Local governments should also encourage property developers to raise funds directly from stocks and bonds in the capital market rather relying on loans.
Furthermore, the report is suggesting that local residential management authorities set up special home mortgage banks that are sponsored by the governments.
(CCTV September 26, 2008)
