China property market facts of the day

From FT

Property sector represents 29 per cent of Chinese gross domestic product and is more than $5tn in debt. Some 41 per cent of the Chinese banking system’s assets are associated with the property sector, and 78 per cent of the invested wealth of urban Chinese is in housing.

This on the share of land sale revenues in local government revenues

Land transfer revenues stood at just 50.7 billion yuan in 1998 according to data from the Ministry of Finance (MOF), yet had risen to over 8.4 trillion yuan by 2020, for an approximately 165-fold increase. In 2020 land transfer revenues were 8.4142 trillion yuan, for a YoY increase of 15.9%. MOF forecasts that 2021 revenues will remain on par with those last year. 

Since 2015 land transfer revenues have steadily expanded as a share of Chinese GDP, reaching 8.3% of the total by 2020. Research from Yuekai Securities indicates that... in 2019 the land fiscal dependence ratio of provinces including Zhejiang, Anhui, Jiangsu, Shandong, Jiangxi, Guizhou and Hubei stood at between 90 – 120%.

And this,

Sales of government land brought 16% more in revenue last year at 8.41 trillion yuan ($1.30 trillion), a sum equivalent to the value-added tax and corporate income tax, two mainstays of China's tax regime, combined... the intake from land sales at 55% of overall tax receipts collected by the central and local governments, up from 26% in 2015. Chinese municipalities often sell land to condominium developers. Local authorities also collect five other taxes relating to real estate, including one for using urban land. Revenue from the five taxes quadrupled over the decade through 2019 and expanded to 25% of local government receipts.

Is there any other instance in history of property being so disproportionately large and important in a major economy?

The Chinese policy makers face a difficult choice. In line with President Xi Jinping's "Common Prosperity", they may want and orderly deflation of the property bubble and also avoid the moral hazard of bailing out the large real estate firms. But property is a critical driver of China's economic growth, underpinning both household wealth and local government revenues as well as bank credit. Any wobble in the property market will invariably ripple across the economy and cause considerable damage. And not even the formidable Chinese government can be confident of either preventing the wobble becoming a self-reinforcing spiral or controlling the contagion once a threshold is crossed. 

Update 1 (28.10.2021)

FT reports that Beijing is considering introducing property tax,

According to research group Capital Economics, an effective tax rate of 0.7 per cent of the total property value would have generated Rmb1.8tn ($282bn) last year in China. That compares to Rmb1.6 tn local governments generated in net revenue from land sales, after paying billions of dollars in land transfer expenses including compensation payments.

And from Robin Harding, 

According to Kenneth Rogoff of Harvard and Yuanchen Yang of Tsinghua University, the property sector accounts for as much as 29 per cent of China’s output. That may be an overestimate in absolute terms, but on a comparable basis it is even higher than in Spain at the peak of its 2006 property boom.