How many units are owned by corrupt officials?
Why has capitalism worked best in the West but often had more mixed outcomes elsewhere? For Hernando de Soto (not the Spanish conquistador but a Peruvian academic hailed by Bill Clinton as “the world’s most important living economist”) the answer is simple and universal: build a property database.
In his 2000 book The Mystery of Capital, de Soto pointed to the importance of developing formal property rights within the legal system, most notably through a proper land registry. Formal ownership rights then bring huge advantages in unleashing capital and spurring growth, the Peruvian believed.
It turns out de Soto’s ideas have not gone unnoticed in China, where policymakers first floated the idea of building a national homeownership database in 2010. “Speed up the construction of the housing information system” is also included as an objective in the 12th Five-Year Plan, categorised in fact as ‘a key information infrastructure project’.
So why the delay? With State Council backing, Jiang Weixin, the housing minister, announced in a webcast in October 2011 that a homeownership database covering 40 cities would be put in place by early 2012. More than a year on and after repeated postponements, China’s pilot land registry is still not up-and- running.
To be fair, it took a century of reform before Her Majesty’s Land Registry – now in its 150th year – saw British real estate get centrally recorded. But China’s ambitions are a bit more limited in their scale. Unlike the UK, there won’t be a full record of prior ownership. Instead a more primitive database is planned, although still enough to offer policymakers more complete market data and give the tax collectors a clearer idea of real estate ownership.
Is that the issue? You’d think a proper land registry would be popular in China, giving middle class homeowners a greater sense of security. But the principle may not seem as alluring to those owning a number of properties. One group with particular concerns will be the government employees who have amassed large property portfolios in spite of meagre salaries.
Put simply, the planned housing database could bring some pretty dreadful exposure of illicit wealth. Investigating the sluggish progress of the land registry, the Economic Observer reported last month that the initiative is being met with sustained resistance at local levels. Officials have been demonstrating what the newspaper terms euphemistically “higher political awareness” in showing a stubborn reluctance to handle such a “high-risk task.”
Nonetheless, frustration is growing at the delay. “If our mobile population [of migrant workers] could be properly surveyed, why not fixed assets?” economist Ma Guangyuan told the Southern Metropolis Daily. “The resistance lies in municipal officials who don’t want to declare their multiple property holdings.”
Unsurprisingly, Chinese web users are proving keener on the undertaking than many of those charged with implementing the scheme. Also riled by the delay, netizens have embarked on a homeownership database of sorts, by exposing some of the most glaring instances of bureaucrats accumulating multiple properties.
The endeavour began thanks to a cadre dubbed ‘Uncle House’. Since October last year, the nickname has become one of the most popular keywords in internet search engines. The label arose after Cai Bin, a low-ranking bureaucrat from Guangdong province, was exposed for owning 22 homes. Cai was sacked but similar cases are now being reported online with furious regularity. Much as the Watergate scandal made the suffix ‘gate’ popular for subsequent debacles, ‘Uncle House’ has entered popular usage, spawning derivatives of a similar ilk, such as ‘Auntie House’ and more.
Many cities have tried to restrict homebuyers from acquiring more than one apartment, in a bid to curtail price rises. But corrupt cadres have found ways of breaching the administrative ban, few more creatively than Zhao Haibin, nicknamed ‘Grandpa House’. He’s an official in Lufeng city’s police bureau, who has been caught forging identities to acquire at least 192 apartments.
Police have also detained Gong Aiai, now better known as ‘Sister House’, and seven people associated with her case. A former vice president of a county-level commercial bank in Shaanxi province, Gong was caught owning more than 40 properties. Most of her holdings – worth $160 million according to whistleblowers and state media – are Beijing properties also acquired using an illegally obtained Beijing hukou or residency permit, sparking further fury. As WiC has reported before, hukou reform is a hot topic. The permits give holders access to social services in cities, but deny them to millions of migrant workers. So how the cadre Gong got hold of a Beijing hukou was soon being seized upon as an example of abuse of power, fuelling speculation about how many officials had obtained multiple hukou to game property restrictions. “China doesn’t really have 1.3 billion people if so many people are getting multiple hukou so easily,” quipped one user at an internet forum.
The scandals have also proven uncomfortable for real estate developers, lifting the curtain on shady sales practices. They’ve confirmed widely-held suspicions that government officials constitute a key part of the ‘VIP client base’ to whom developers sell multiple properties.
In an unexpected twist to the unfolding saga of ‘Sister House’, it was then alleged online that Gong acquired many of her own properties in the primary market from SOHO China. That meant that the Beijing developer’s chairman Pan Shiyi was soon taking flak, although he told his 14 million Sina Weibo followers that the rumour was the work of short-sellers looking to drive down the SOHO share price.
Despite the frantic bouts of accusation and denial, netizen efforts to expose illicit property wealth are being hailed as a successful anti-graft campaign. Even Xinhua reckoned that the bottom-up approach would pressure the authorities to launch the planned homeownership database and, earlier this month, the housing ministry seemed to up the ante. It announced that the State Council wants the database to cover 500 cities by June this year.
Is it for real this time? Quite possibly. According to official figures, secondary transactions in Beijing’s residential market more than tripled year-on-year in the first two weeks of January – a telling sign that wayward bureaucrats were dumping flats.
Citing an internal report by the Communist Party’s anti-corruption body, the Economic Observer also reported that fire sales by officials or executives at state firms had been spotted in 45 cities in total.
“The housing ministry is essentially leaving a short window for officials to unload their property holdings,” the Southern Weekly wrote. “Once the property database is in place, their nappies will be undone.”
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