China May Expand Property-Tax Trials Beyond Cities of Shanghai, Chongqing

Chinese Finance Minister Xie Xuren said the nation may expand property-tax trials, as the government prolongs efforts to cool the real-estate market, make housing affordable and limit asset bubbles.

Taxes can guide housing demand, Xie said at a press briefing in Beijing today during the annual meeting of the National People’s Congress, without saying where more tests could take place. So far, the government has pilot projects in Shanghai and Chongqing.

China’s benchmark stock index fell the most in a month today after the government yesterday set a lower economic growth target for this year than 2011 and officials reiterated that curbs on the real-estate market would stay. Anhui Conch Cement Co. (914), the nation’s biggest maker of the building material, tumbled 4.4 percent as property developer China Vanke Co. (200002)’s sales slumped.

“There is agreement among the authorities that a property tax is one mechanism that can prevent asset bubbles in the long run,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA. Xie’s comments are “confirmation that they are going to do it on a wider scale,” she said.

Premier Wen Jiabao’s efforts to rein in property prices have added to the risk of a deeper slowdown in the world’s second-biggest economy. In his report to the National People’s Congress yesterday, he said that regulation of the real estate market is at a “crucial stage.”

Growth Goal

The government is targeting a 7.5 percent expansion in gross domestic product this year, down from the 8 percent goal in place since 2005.

China ought to introduce a property tax to provide a stable source of revenue for local governments, Li Daokui, an academic adviser to the People’s Bank of China, told reporters in Beijing today.

The Shanghai Composite Index fell 1.4 percent, the biggest loss since Feb. 7 and paring this year’s gain to 9.6 percent.

Sales at Vanke, the nation’s biggest listed property developer, dropped 27 percent in the first two months of 2012 from a year earlier to 19 billion yuan ($3 billion). Sales last month slumped 40 percent from January, the company said. The stock dropped 0.9 percent.

Separately, Xie said the government will appropriately handle debt repayments by local governments and continue to take steps to control their borrowing. Local authorities have set up funds to repay debts and the government will ensure financing for major projects, he said.

Debt will be categorized and gradually incorporated into budget management, he said, without elaborating.

To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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