20 July 2019
Rather than solving runaway home prices by supplying more land, Beijing mayor Cai Qi is tackling the demand side. Photo:
Rather than solving runaway home prices by supplying more land, Beijing mayor Cai Qi is tackling the demand side. Photo:

Beijing’s new mayor has a bold plan to tame home prices

Most cities increase land supply to tame soaring home prices. However, Beijing has taken the opposite view.

Cai Qi, the city’s new mayor, said Beijing would reduce the area of construction land supply by 30 square kilometers by demolishing buildings on these sites.

Cai, a close ally of President Xi Jinping, was sworn in as mayor on Jan. 20.

He has set bold goals to slash the gross building area to 2,800 square kilometers by 2020 from 2,921 sq. km. at present.

Strange as it may sound, Cai’s idea makes sense.

The capital city has a permanent population of 21.7 million, making it the nation’s second most populous city after Shanghai.

It’s already grappling with issues like other big metropolises such as pollution, traffic jams, water shortages and strained public resources.

Some critics say Beijing has too many people. And it could become a disaster if the government continues to let more people in.

The area of Beijing’s construction land rose from 1,200 sq. km. in 1990 to 1,900 square kilometers in 2000 and to nearly 3,000 sq. km. at present.

Over the years, land supply growth has failed to tame skyrocketing home prices.

As China’s capital city, Beijing has the best resources in commerce, education, culture and entertainment. It’s the most desirable destination for most mainlanders. The term “Beijing drifters” shows the special status of the city among Chinese.

Continuously expanding land supply has actually made things worse as Beijing attracts an ever increasing number of immigrants from other parts of China.

That’s why Cai has decided to tackle the problem from the demand side.

Cai plans to force 500 factories to move out of Beijing, shut down 120 wholesale markets and 38 logistics centers this year.

Also, more than 40 colleges, universities and hospitals will relocate outside the city. These built-up areas will be used for parks and walking trails for the public.

Housing demand would cool as numerous facilities are relocated elsewhere and as people may also move away from Beijing to new locations.

Cai is following central government policy, which calls for a freeze on construction land supply in mega cities including Beijing, Shanghai and Shenzhen.

Whether Cai’s plan will work is of significant interest for other big cities in China. He faces a tough issue — Beijing’s fiscal income might slump as a result of falling revenue from land sales.

This article appeared in the Hong Kong Economic Journal on Feb. 10

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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