While most local governments are toeing the line by maintaining a restrictive housing policy, Wuhan and Zhengzhou, both located in central China, boldly announced a set of housing purchase incentives a few days ago to lure talent from other parts of the country.
At the Communist Party’s 19th national congress in Beijing in October, President Xi Jinping reiterated that “houses are built to be inhabited, not for speculation”.
Many Chinese cities have vowed to keep a tight grip on the housing market in compliance with the wishes of the central authorities, but why would Wuhan and Zhengzhou dare to be the exceptions?
Because the duo are fighting for the top city position in the region.
Beijing, Shanghai, Shenzhen and Chongqing have already built their dominance in north, east, south and west China respectively. But the spot of top city in central China remains untaken. Hence, Wuhan and Zhengzhou are vying to gain the coveted title.
Inter-city competition is one of the biggest drivers of China’s economic advance in recent years. Local authorities have been competing against one another in talent attraction, the creation of a business-friendly environment and infrastructure development.
Wuhan is the capital city of Hebei province, while Zhengzhou is the capital of Henan province. Both cities have a population of more than 10 million.
Thanks to high-speed railways passing through the region, both cities have seen rapid growth.
However, Wuhan and Zhengzhou are not far from each other geographically, and both have set similar growth strategies, so the competition between the two is only bound to heat up further.
Last week, Wuhan launched “housing coupons” for sizable corporate and high-tech firms. These firms will be granted 20 such coupons per year for recruiting non-local employees. With the coupon, one would be exempted from current housing purchase restrictions. Coupon holders can also get a 20 percent discount when they buy a home, with the local government paying the difference.
It’s estimated that the Wuhan municipal government will hand out 10,000 housing coupons each year to attract talents to settle down in the city.
In Zhengzhou, meanwhile, non-local college graduates will be treated as locals when they buy a home in the city, as long as they find a job at a local company. Also, those with a doctorate degree, a master’s degree and those who graduated from the nation’s top 180 universities will obtain first-time home purchase subsidy of 20,000 to 100,000 yuan (US$3,056-15,281).
Although Wuhan and Zhengzhou seem to be outliers, their moves may also suggest that the policy tightening in the housing market in the last couple of years may have achieved certain results and the once overheated property market has somewhat cooled down.
This article appeared in the Hong Kong Economic Journal on Dec 27
Translation by Julie Zhu
[Chinese version 中文版]
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