Commentary on Political Economy

Tuesday 23 April 2019

The Expropriation of the Chinese People (by the Rats in Beijing!)

As we have often argued here, the trajectory of the Chinese economy over the last forty years offers the most valuable insights not just on the workings of capitalism globally but also and above all about "the destiny" of this social system that is very rapidly leading us toward an apocalyptic "global" abyss.
For the benefit of our friends, so that they may be able to undeceive or disabuse people of good will - and to ridicule people with evil intent -, the best way to counter those morons who argue that "the Communist Party has lifted hundreds of millions of Chinese out of poverty" is to remind them, first, that China is still an extremely poor country by any standard, with a very skewed income and wealth distribution (the Gini coefficient) favouring the urban populations that are vital to the legitimacy and political survival of the Dictatorship. The second point is that the Dictatorship has been able to mobilize vast human and physical resources by simply running roughshod over the lives of its people and through the cruel exploitation of so many poor and young Chinese workers. _ All for the benefit of capitalists in the West who have made unprecedented profits out of the cheap Chinese labour force and been able to lower nominal wages in Western countries by raising real wages by means of cheap massive produce coming from, you guessed it, China. Of course, although the top layers of the Chinese Dictatorship have all turned themselves into billionaires, they could not do so without raising the incomes of a portion of the population.
But yet another way in which Chinese capitalists have enriched themselves - and this is the largest factor in "the mobilisation of resources" to which we referred - is quite simply through the expropriation of Chinese peasants and the confiscation of their lands - "in exchange" pf course for holes in the sky called "apartments"! Square metre for square metre! But it is obvious to the most inane lunatic that a square metre of "land" is much more valuable than a square metre in a "hole in the sky"!!!
In the process, of course, this entire insane practice eventually had to get to the stage where the Dictatorship could no longer expropriate land and make tons of profits by selling it to workers in the rapidly expanding mega-cities of China! And this, dear folks, is exactly what is happening even as we punch the keys of this computer! Please read below - and "read between the lines", which is what the literal meaning of "intel-ligere" is! The article is from the Financial Times of London. Happy week to you!


A massive scheme to demolish nearly 25m homes in designated “slum” areas in China — forcing the relocation of some 100m people over the past four years — is straining local government finances amid a downturn in land sales. Residents of Qiangbei village in the central Chinese city of Jiaozuo say the government has been destroying homes without compensating those evicted with new housing or money. “The national policy is to build relocation housing before demolition, but here it’s the opposite way around,” said Zhang Xiaoqin, a 49-year-old farmer who was collecting the last items from her two-storey village house ahead of demolition. The villagers’ plight reflects difficulties some municipalities in China have had in meeting spending obligations as they struggle under a collective debt burden that reached Rmb40.3tn ($6tn) last year, according to S&P Global. As some municipalities reckon with budget shortfalls, they are delaying compensation to those evicted from slum housing and postponing the construction of new homes, leaving many without permanent residences.

Beijing aims to redevelop all of China’s shanty towns by 2020 and has said residents should be given a choice between a new house of the same floor area, or monetary compensation based on market prices when their homes were demolished. The nationwide renovation programme mostly affects rundown apartment blocks built before the late 1990s and housing in so-called “urban villages” — rural areas that have become surrounded by cities due to rapid urbanisation. More than 24m properties have been demolished since 2015. Compensating residents and building relocation houses has cost local governments Rmb5.06tn over the past three years, according to the housing ministry. Local governments borrowed from state-run banks to fund renovations, and had an outstanding balance of nearly Rmb3tn in borrowing for such schemes at the end of last year, according to consultancy Gavekal Dragonomics. The loans are generally at favourable interest rates with maturities of up to 25 years. The projects can generate revenue for local governments, which sell land previously occupied by rundown housing to commercial developers, making a profit even after residents were compensated. Slum renovation was a major factor behind a boom in government land sales, which reached Rmb6.5tn last year, up 25 per cent on 2017.

The dynamic is well understood by villagers in Fuyang, central Anhui province, who swapped their rural homes for tower blocks in 2017. “It’s not as if all our homes were bad,” said a woman surnamed Zhao. “Many had been nicely decorated, but we were labelled a slum district so the land could be sold.” Cash payments, which accounted for 54 per cent of national compensation awarded in 2017, were used to buy pre-built properties, helping China clear its huge supply of unsold houses. Ms Zhao decided to rent despite receiving Rmb1m in cash compensation — enough for a house with some to spare. “The more slum renovation there is, the more people become rich overnight,” she added.

 But China is now braced for a land sales market slowdown. Land sales fell 34 per cent in the first two months of the year, while the 5 per cent drop in local government revenues from land sales was the biggest since a period of economic turmoil in 2015.  The slowdown has coincided with an increase in government responsibility to build new homes: worried that the payments were overheating property prices in lower-tier cities, Beijing last summer ordered governments to curb cash compensation. In Jiaozuo, where the government says 75,000 people have been relocated since 2015, locals said not only had payouts been phased out, they also complained about being coerced to sign agreements to move. “Those who signed didn’t agree in their hearts. They were party members and those employed by the government who would lose their jobs if they didn’t sign,” said one Jiaozuo resident.

 China’s regional and local governments face large and persistent gaps between their spending needs and limited revenue sources, according to rating agency Moody’s, which said the disparity had become more pronounced in recent years. Regions in central and western China, such as Jiaozuo, had the largest gaps, it added.  Analysts say the moves to cut compensation and delays to build housing reflect a cooling of the residential market in smaller cities in recent months, which is making it more difficult for authorities to recoup compensation expenses by selling land. Average prices for land sales in Chinese cities fell 11 per cent in the last quarter of 2018, according to official statistics. “For some regions, the revenue from slum renovation is good,” said Wang Yongqin, a local government finance expert at Fudan University in Shanghai. “But in fourth-tier cities, governments are poor and maybe they cannot deliver on this policy.”

 Since the summer, Beijing has eased the financial strains on local governments by encouraging them to sell “special purpose” bonds for housing renovation to commercial banks. About Rmb3tn has been raised through this method since June, according to data collected by Wind Information. But regions with weaker housing markets can find it difficult to raise money. A slum renovation bond issuance by a small city in the province of Guizhou was cancelled this year due to lack of interest, a banker with knowledge of the matter said. A Gavekal analysis of 2019 slum renovation targets from 20 provinces shows an average reduction of 30 per cent from last year. Areas with weaker land demand will face difficulty raising funds to cover their slum renovation projects, analysts say. In such areas, new bond issuance may not be enough to make up for fiscal strains. Rmb3.6tn of local government debt is due for repayment from April 1 through the end of 2021, according to Bloomberg data.

Local government debt exceeds fiscal revenue by 300 per cent in 23 provinces, and 500 per cent in 10 provinces, according to investment bank CICC. “Annual new money issuance quotas are not large enough to address some regional and local governments’ funding gaps, even with the higher expected [bond issuance] quotas this year,” said S&P Global, adding that some regions “have limited upside potential for further bond issuance given that they are already close to their debt limits”.

 In the central city of Heze, where the local government demolished 120,000 properties last year, locals said that the size of relocation houses had been cut 10 per cent. “We just want what we are owed,” said Li Changjun, 50, whose rural house was slated for demolition. “A square metre for a square metre.”

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