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In realty, SOEs play speculative games

(China Daily)
Updated: 2009-08-19 15:35

State-owned enterprises should be restrained from rushing into the real estate market for making profits, says an article in Yanzhao Metropolitan News.

Excerpts:

The recent land purchases by State-owned enterprises (SOEs) has angered quite a number of private real estate developers. Some developers pointed out that it is unreasonable for State-owned enterprises to compete with private developers in buying plots of land with public funds.

In reality, both State-owned real estate developers and private home-builders are of a kind when it comes to the property market. There is no difference between the two in speculating on home prices for making a profit.

Several SOEs have acquired land at exorbitant prices, which makes many people worry that high land prices will drive up further the already high home prices.

Related readings:  Will efforts to rein in real estate prices work?  Real estate market sees big step  Mainland real estate market back on growth track  Reality of the real estate market is really bitter

According to a survey, 70 percent of the 136 enterprises directly owned by the central government engage in the real estate development business, although real estate is not their core business; and, 60 percent of the expensive plots of land were bought by SOEs. This trend shows that the expansion of SOEs in the real estate sector poses a threat to the prospects of private developers. More and more of the real estate market is being cornered by the SOEs.

Many SOEs are not good at building homes. With huge funds in their hands, they are rushing into the real estate market, buying expensive land tracts and pushing up home prices. As a result of the transfer of the capital from their core businesses to the real estate market, these SOEs may have done a worse job in their core businesses, which is a threat to the health of the overall industrial structure.