Date
23 March 2017
Some factory owners complain that after all the tough work, it is still hard to make money. Comparatively, profiting from property is much easier. Photo: China News
Some factory owners complain that after all the tough work, it is still hard to make money. Comparatively, profiting from property is much easier. Photo: China News

Why business owners are going into property speculation

It’s often hard to gauge whether some of China’s economic troubles are going away or getting worse based on mainland media reports.

On one hand, there have been headlines about how the profitability of the industrial sector has been improving, or articles trumpeting the progress in reducing the country’s excess capacity.

On the other hand, we have heard stories that contradict them such as this one.

Amid surging home prices, many people have flocked to the housing market in the hope of making a killing.

Among them, many used to be business owners.

The real economy is still facing immense challenges, with return on investment steadily declining over the past few years, the 21st Century Business Herald reports, citing a survey by the Chinese Academy of Fiscal Sciences.

As such, many entrepreneurs closed their businesses and jumped on the bandwagon of property speculation, which so far has rewarded speculators nicely, the paper said.

Some company owners complain about rising costs and thinner margins, especially those fees charged by local governments such as product examination fees, contributions to infrastructure funds etc.

Others lash out at the high funding costs for smaller firms, despite several rounds of rate reductions.

Small and medium-sized companies in Guangzhou on average have to pay 12 percent interest per annum for funds, for instance.

To get the loans, they are often asked to patronize other bank services as well, which indirectly inflates the interest cost.

Quite a few lament the heavy tax burden, pointing out that businesses have to pay taxes of all sorts even before they make any money.

It seems that to rejuvenate China’s industrial sector, there is still a lot of changes the government needs to undertake.

Empty slogans and propaganda alone won’t do.

– Contact us at [email protected]

RT/RA

EJ Insight writer

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