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POLITICAL ECONOMY
China property tycoon blames government for prices
by Staff Writers
Beijing (AFP) Jan 3, 2013


US heading for abyss despite 'cliff' deal: Xinhua
Beijing (AFP) Jan 2, 2013 - China's official news agency warned the United States on Wednesday it was heading towards an "abyss you can never come out of" even though Congress backed a deal to avert the "fiscal cliff".

After the House of Representatives approved a bill which avoids tax rises for most Americans and delays automatic spending cuts, a commentary by Xinhua pointed to bigger fiscal challenges ahead for US lawmakers.

"As the world's sole superpower, the United States is clearly not Greece," Xinhua said. "But economics and common sense do not lie.

"People, or governments, can overspend for some time, but they simply cannot live on borrowed prosperity forever."

China, which has the world's biggest foreign exchange reserves, is a major buyer of US Treasury debt.

The state-run news agency identified the US public debt of nearly $16.4 trillion -- more than 100 percent of its gross domestic product -- as Washington's key challenge, calling it a "fiscal abyss" that made Europe's sovereign debt crisis seem a "mere hiccup".

"The most worrying thing about US politicians is that if they have come so close to falling off a 'cliff', they are far less likely to reach a deal to help their country climb out of an abyss," the commentary said.

"In a democracy like the United States, tax increases and spending cuts, the exact dose of medicine needed to cure its chronic debt disease, have long proved hugely unpopular among voters. So the politicians have chosen to kick the can down the road again and again.

"But as we all know, the can will never disappear," the commentary added. "Sometime and somewhere, you might trip over it and fall hard on the ground, or in the US case, into an abyss you can never come out of."

A Chinese property tycoon blamed a government "land famine" for high property prices -- which the authorities have long sought to rein in -- after he paid 1 billion yuan ($160 million) for a plot in Beijing.

Ren Zhiqiang, a prominent real estate tycoon, paid the mammoth price for development land in a suburb of the capital before turning to Weibo, China's version of Twitter, where he has 13 million followers.

"For fear of sky-high prices, (the government) has stopped holding many land auctions and reduced the supply of land, creating a land famine that has led to sky-high prices," he said.

"Does the government think it can control property price increases by reducing the land supply?

"This is neither good for companies nor for society," he added. "But to survive in a land monopoly and shortage means doing whatever you can."

Ren's purchase was a soaring 490 percent above the auction starting price, the highest such premium since 2010, the Beijing News said, marking an extreme case of the spiralling prices that China has struggled for years to control.

Authorities are concerned that escalating prices could shut more ordinary homebuyers out of the market, fuelling discontent and possible social unrest.

Measures announced in early 2010 have ranged from restrictions on second and third home purchases, higher down payments and taxes in some cities on multiple and non-locally-owned homes.

The restrictions have frustrated players such as Ren and cooled the once red-hot market, with analysts estimating that prices nationwide have risen only four to seven percent since then.

But pent-up demand, easing government monetary policy and inflows of speculative funds from abroad anticipating a recovery have brought the property market out of the doldrums.

Some Weibo users shared Ren's frustration, with one lamenting that high prices were "good for the government, of no choice for the developer and bad for homebuyers".

But others showed blamed the businessman instead, with one pointing out: "How could you buy at such a high price? Doesn't that make you an accomplice?"

"Crocodile tears!" wrote another.

.


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