Local governments in China depend for their income mostly on the sales of land, not on tax revenue. As debts went up and only the larger cities have still enough land to sell off, that methods might not be sustainable in the long run, says economic analyst Arthur Kroeber in the New York Times.
The Chinese bureaucracy is now debating an alternative, a property tax, but is running into fierce opposition, especially by them who own a lot of real estate. The New York Times:
“It is widely recognized that the current structure of property, which has been a big source of growth, is not sustainable,” said Arthur Kroeber, managing director of Beijing-based Dragonomics, an economics research firm whose clients include hedge funds and Fortune 500 companies.
The Finance Ministry and other government supporters of the tax will eventually prevail, Mr. Kroeber said, overcoming resistance from officials who say it will hurt the value of their own real estate investments.
“They will come to grips with this,” Mr. Kroeber said in an interview. “It will be messy and it will be a drawn-out battle, but I think that it will happen.”
Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your conference? Do get in touch.