China Rising: will the property bubble there burst too?

The Professional Land Reform Group (PLRG) held its first evening meeting at the new venue of London South Bank University (LSBU) on 16 September. Speaker Dave Wetzel, an independent transport consultant and PLRG Chair, gave a talk China needs LVT, which was followed by discussion.

Wetzel has visited China at least once every year for the past five years, at the invitation of universities, professional bodies or governments there, mainly to talk about various ways of using land values to finance infrastructure projects. He usually starts his talks there by reminding his Communist audiences that Karl Marx wrote on the Land Question in Volume III of Das Kapital, published posthumously in 1909, 40 years after his contemporary Henry George (self-taught American political economist and supporter of free markets) published Progress and Poverty. Marx had thought George was "giving sticking plaster to capitalism".

Nevertheless Wetzel confirms that the modern Chinese Communists are receptive to the more free-market ideas of George than was Marx, drawing more from nationalist Chinese founder Sun Yat Sen (a keen supporter of George's "Single Tax" on land values) and from Hong Kong (where there is no freehold land tenure in an otherwise free market economy).

The Chinese Government, according to Wetzel, is very worried about house price inflation, very keen to build "green" cities and very open to foreign academics and their ideas. The American Lincoln Institute of Land Policy, which was set up to promote understanding of George's ideas, has established a presence in Peking University.

In the current issue of the international journal Land & Liberty, published by the Henry George Foundation of Great Britain, Danish commentator Lars Rindsig reports that "between 30 and 50 percent of properties in the centres of major Chinese cities are empty and only used for speculative purposes". These include some 90% of all p[roperties sold since mid-2009.

The Chinese government has introduced mandatory down-payments of between 30% (for owner-occupiers) and 100% (for third and subsequent purchases) of sale price for dwellings. Despite this, the gambling instincts of Chinese appear to be putting the entire economy at risk of a crisis similar to that recently experienced in the West. Prices in Beijing, where the annual minimum wage will now buy you 6 square feet of living space, have trebled in two years