China Construction Bank

China Construction Bank (CCB), the country’s third-largest lender, said its net profits increased in the third quarter.

According to a release CCB’s net profits grew 11.95% to RMB25.6 billion ($3.74 billion) from July-September.

Net interest income rose 14% to RMB57.1 billion in the third quarter. Net earnings were RMB0.11 per share, based on domestic accounting standards.

Welcome to China Construction Bank

That’s up 10% from the same period last year

At the end of September, the lender held subprime mortgage securities valued at $244 million.

Sadly, it also had $191 million in bonds issued by Lehman Brothers and $1.51 billion issued by Fannie Mae and Freddie Mac.

The government’s latest tax initiatives, which exempt first time property buyers from paying the stamp tax, helped buoy the country’s cooling real estate sector.

China also lowered the down payment from 30 to 20% for first time home buyers which strengthened the property market.

Analysts said these adjustments boosted CCB’s profitability as it is the nation’s leading mortgage lender.
Source: China View

China farmer

China’s 700 million farmers have mostly missed out on the country’s economic boom. In 2006 Vice Premier Wen Jiabao correctly noted that rural poverty and land grabs that strip farmers of their land were a ‘key source of instability’ in China. Two years later, the situation is just as dire.

A raft of reforms recently announced may help. But if history is any guide, the reforms will provide only a superficial fix.

The main, still unaddressed, problem is farmers’ lack of full property rights. Unlike in cities, where owning property is now permitted, almost all farmland in China is owned by village collectives.

China farmers

Under a reform passed a decade ago, farmers ostensibly have 30-year land-use rights that allow them to till the soil. But corrupt local officials have little trouble stripping these rights through arbitrary ‘reallocations.’ These land grabs result in tens of thousands of protests in rural China every year.

The new set of reforms is being hailed by state media as a ‘landmark,’ but they still don’t give farmers the ownership rights. They do, however, make it easier for farmers to sell or transfer their land rights, which could unlock around $500 billion in land assets. They are also intended to make it harder for local officials to seize farmers’ land without compensation.

Much more HERE.
Source: Wall Street Journal Online

Shanghai apartments

To An Wei, a white-collar migrant worker in Shanghai, China’s tax exemption on house purchase and mortgage deposits reduction are a real stimulus for home buying.

The newly-wed IT worker said, ‘The new policy would not only save me more than RMB4,400 ($644) from the tax reduction in purchasing a 90-square-meter flat in Shanghai and make it earlier to obtain a bank loan to pay for the mortgage, but also give me confidence in the stability of the housing market.’

The Ministry of Finance, the State Administration of Taxation and the People’s Bank of China, the country’s central bank, made the synchronous move on Wednesday to announce a series of new measures to boost the domestic real estate market, which had shown signs of slowing amid the global financial turmoil.

‘The policy is concentrated on tax reduction and relaxing restrictions on financial institutes to give loans to private homebuyers,’ said Nie Meisheng, the Chamber of Real Estate of the All-China Federation of Industry and Commerce director.

The chamber was one of the advisors prompting the promulgation of the policy.

The Ministry of Finance announced on Wednesday to exempt the stamp tax on property purchase and the value-added tax of land on property sales, starting from Nov. 1, to boost the slowing real estate sector.

More HERE.
Source: China View

This is the sort of situation that gives developers an attack of the vapors. They need to take two Aspirin and have a nice lie down before considering the implications.

On April 7, 2008, the State Administration of Taxation issued a circular governing provisional Corporate Income Tax payment issues for real estate developers , which is retrospectively (note that word for it gives one pause) effective from January 1, 2008.
It applies to the following enterprises:

(i) Chinese resident enterprises that are engaged in the real estate development business, including both domestic Chinese enterprises and foreign-invested enterprises; and
(ii) Those enterprises that make monthly or quarterly provisional CIT payments based on actual profits.

The provisional CIT payable is the result of multiplying such profit by the CIT rate (standard rate of 25% from January 1, 2008). That may be a little difficult to follow but take it that it does not make the life of a real estate developer any easier.

After the final completion of a project that has been pre-sold, the prepaid CIT will be reconciled with the actual CIT payable, based on the project’s actual profits.

In other words when you have made your profit the tax that can be demanded will be worked out.

For typical real estate projects, the profit rate shall be:

Not lower than 20%, for projects located in provincial capital cities as well as certain cities in special administrative regions and other designated cities.
Not lower than 15%, for projects located in second-tier cities.
Not lower than 10%, for projects located in other areas.
For low cost residential, the profit rate shall not be lower than 3%.

For real estate developers this does not bode well. Indeed, it bodes ill. Much, much more on this in a Mondaq special report which you can find by clicking HERE.
Source: Mondaq

A State Administration Taxation official has dismissed market rumors that the property tax levy is likely to start within the year.

Basically what he said was the it could not happen in a hurry because the departments concerned were not connected and thus unable to administer the tax.

The official said previous reports that the central government would start to collect the tax before June were wrong

The Guangzhou Daily quoted this unnamed official as saying: ‘The levy will not start in the next two years. The property tax involves too many issues to be dealt with easily.’

At the end of last year Liu He, vice-minister of the Office of the Central Leading Group of Financial and Economic Affairs, suggested the levy would start in pilot areas in 2008. From this started the concern over an immediate implementation of the property tax.

It is known that preparations for the introduction of the property tax started early in 2003. It was seen as part of a systematic tax adjustment aimed at unifying the current housing property tax, urban real estate tax, land value-added tax and land-leasing fees under a single name.

If the land-leasing fees, which constitute a key component of property prices now, become part of the property tax, which would be spread more evenly to 40 to 70 years after the purchase, housing prices will be reduced significantly.

However, the official explained, basically what it was about was inter-departmental lack of connectedness.

He said, ‘At present the tax, financial and real estate departments are not completely connected, we cannot even effectively communicate our information through the network, let alone levy a property tax that involves all the three systems.’
Source: Shanghai Daily