{"id":178,"date":"2022-05-18T04:09:11","date_gmt":"2022-05-18T04:09:11","guid":{"rendered":"http:\/\/1.15.156.47\/wordpress\/?p=178"},"modified":"2023-12-23T17:09:54","modified_gmt":"2023-12-23T17:09:54","slug":"how-escrow-account-regulations-slow-down-chinas-housing-market","status":"publish","type":"post","link":"https:\/\/weijiabin.xyz\/?p=178","title":{"rendered":"How Escrow Account Regulations Slow Down China&#8217;s Housing Market"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"178\" class=\"elementor elementor-178\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-8cc248f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"8cc248f\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-30892bd\" data-id=\"30892bd\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1c7f6f4 elementor-widget elementor-widget-image\" data-id=\"1c7f6f4\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.6.8 - 27-07-2022 *\/\n.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=\".svg\"]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}<\/style>\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"582\" src=\"https:\/\/weijiabin.xyz\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-17-at-11.20.55-PM-1024x582.png\" class=\"attachment-large size-large\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7dd2879 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7dd2879\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-1fd9c6e\" data-id=\"1fd9c6e\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-71e9ca8 elementor-widget elementor-widget-text-editor\" data-id=\"71e9ca8\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.6.8 - 27-07-2022 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#818a91;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#818a91;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p>Problems: <strong>Land Revenue Trap<\/strong><\/p><ul><li><b>Land supply <\/b><span style=\"font-weight: 400;\">\u2013 Local governments across China use land sales as the most important source of revenue and artificially keep the property prices high.<\/span><\/li><li><b>Demand for property <\/b><span style=\"font-weight: 400;\">\u2013 People use real estate as a major investment due to its high returns and absence of taxes.<\/span><\/li><li><b>Incentives for disproportionate growth<\/b><span style=\"font-weight: 400;\"> \u2013 Very large down payments for property led developers to start a lot of buildings without necessarily completing the projects.<\/span><\/li><li><b>Heavy macroeconomic reliance on housing industry <\/b><span style=\"font-weight: 400;\">\u2013 Real estate market represents 25% of China\u2019s GDP.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2386848 elementor-widget elementor-widget-text-editor\" data-id=\"2386848\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Existing policy:\u00a0<\/span><b>Regulation through supervised accounts<\/b><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Government incorporated supervised escrow accounts where developers keep 30% of the value of residential projects.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Proceeds from home sales make up more than 50% of the developers\u2019 cash inflow.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Policy aimed at preventing project abandonment and misuse of down payment funds.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bf61d01 elementor-widget elementor-widget-text-editor\" data-id=\"bf61d01\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Results from Policy:<\/p><ul><li><span style=\"font-weight: 400;\"><strong>Liquidity crunch<\/strong> &#8211; Due to the high percentage of cash inflow required to be kept in supervised escrow accounts, developers face a liquidity crunch.<\/span><\/li><li><span style=\"font-weight: 400;\"><strong>Deceleration of the economy &#8211; <\/strong>Because the real estate market supports 25% of the country\u2019s GDP, restrictions on developers cause a property-led slowdown of the economy.<\/span><\/li><li><span style=\"font-weight: 400;\"><strong>Need to ease restrictions &#8211;<\/strong>\u00a0The slowdown leads the government to ease restrictions on developers, moving a step back to the previous status quo of unsustainable growth.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-58a46e5 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"58a46e5\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-9080005\" data-id=\"9080005\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-f47bfc7 elementor-widget elementor-widget-image\" data-id=\"f47bfc7\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"560\" src=\"https:\/\/weijiabin.xyz\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-17-at-11.25.54-PM-1024x560.png\" class=\"attachment-large size-large\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-854bce0 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"854bce0\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-8234abe\" data-id=\"8234abe\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-01d8f60 elementor-widget elementor-widget-text-editor\" data-id=\"01d8f60\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The three main reinforcing loops we identified are Business Growth, City Prosperity and Land Revenue Trap.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">The first one refers to the incentives that real estate developers have to keep constructing new buildings without necessarily finishing previous ones through the use of pre-sale funds. The balancing counterpart is the market equilibrium, as there is a limit to the number of buildings needed to house all of the population.<\/span><\/p><p><span style=\"font-weight: 400;\">City Prosperity refers to the incentives that governments have to keep expanding urban spaces and taking more land to therefore make more land sales revenue.<\/span><\/p><p><span style=\"font-weight: 400;\">Stagnation refers to the fact that there\u2019s a limit to the physical space a government can take to sell land, so the revenue it gets from these sales will eventually stagnate.<\/span><\/p><p><span style=\"font-weight: 400;\">In consequence, the Land Revenue Trap is a reinforcing loop that explains that if a government is too reliant on government land revenue and land sales start decreasing, economic growth will decrease and land price will decrease, making it harder for the government to maintain its revenue from land sales.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-5a9f746 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"5a9f746\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-4545b9b\" data-id=\"4545b9b\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-88f6ed2 elementor-widget elementor-widget-image\" data-id=\"88f6ed2\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"531\" src=\"https:\/\/weijiabin.xyz\/wp-content\/uploads\/2022\/05\/Screen-Shot-2022-05-18-at-12.25.21-AM-1024x531.png\" class=\"attachment-large size-large\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-0d37d6f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"0d37d6f\" data-element_type=\"section\" data-settings=\"{&quot;_ha_eqh_enable&quot;:false}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-e0419c3\" data-id=\"e0419c3\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-dc9c226 elementor-widget elementor-widget-text-editor\" data-id=\"dc9c226\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p class=\"p1\">Let\u2019s look at the escrow account variables.<span class=\"Apple-converted-space\">\u00a0<\/span>We include the escrow account as an internal variable in this diagram. So when the government observe that the closing rate and affordability decrease which indicates that the property market is probably overheated. The government will launch strict policies on the escrow account to control liquidity of the developers and further to slow down the construction rate.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p><p class=\"p1\">But at the same time, the lower construction rate leads to lower land selling rate and the<span class=\"Apple-converted-space\">\u00a0 <\/span>government will loses a lot of revenues, which further influences the economic because the city GDP relies on land revenue. Thus, escrow regulation can slow down overheated market in short term. but it can not help the city escape from the land revenue trap.k<\/p><p class=\"p1\" style=\"font-variant-ligatures: normal; font-variant-caps: normal; font-family: Roboto, sans-serif; font-size: 14px; font-style: normal; font-weight: 400;\">So we think, As many experts pointed out, the fundamental solution is to design a tax system to enable the government to capture value from the booming housing market not only at the land acquisition stage<span class=\"Apple-converted-space\" style=\"font-size: 14px;\">\u00a0\u00a0<\/span>but also at the property possession stage.<span class=\"Apple-converted-space\" style=\"font-size: 14px;\">\u00a0<\/span><\/p><ul class=\"ul1\" style=\"font-variant-ligatures: normal; font-variant-caps: normal; font-family: Roboto, sans-serif; font-size: 14px; font-style: normal; font-weight: 400;\"><li class=\"li1\" style=\"font-size: 14px;\">Would decrease local governments\u2019 reliance on land sales as main source of revenue<\/li><li class=\"li1\" style=\"font-size: 14px;\">Would disincentivize excessive use of real estate as a major investment tool.<\/li><li class=\"li1\" style=\"font-size: 14px;\">it would encourage the developers to switch their business model from \u201csell fast\u201d to \u201chold long\u201d.<span class=\"Apple-converted-space\" style=\"font-size: 14px;\">\u00a0<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Problems: Land Revenue Trap Land supply \u2013 Local governments across China use land sales as the most important source of revenue and artificially keep the property prices high. Demand for property \u2013 People use real estate as a major investment due to its high returns and absence of taxes. Incentives for disproportionate growth \u2013 Very [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[18],"tags":[23,55,28],"class_list":["post-178","post","type-post","status-publish","format-standard","hentry","category-data-analytics-visualization","tag-real-estate","tag-system-dynamics","tag-urban-economics","entry"],"_links":{"self":[{"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/posts\/178","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=178"}],"version-history":[{"count":3,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/posts\/178\/revisions"}],"predecessor-version":[{"id":186,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=\/wp\/v2\/posts\/178\/revisions\/186"}],"wp:attachment":[{"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=178"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/weijiabin.xyz\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}