The Impact of Tax-Sharing Reform on Housing Market in China

Abstract

The impact of Tax-Sharing Reform on the housing market in China and its effectiveness in curbing speculative practices are subjects of critical importance. The Chinese governments principle of Housing is for living, not for speculation underscores the challenges posed by the persistent housing bubble, fueled by speculative behavior. This study delves into the historical context of the 1994 tax-sharing reform, which initially stimulated the growth of the housing market by increasing government revenue and providing local governments with greater financial autonomy. Drawing on a comprehensive analysis, this paper explores the underlying causes of the current issues in the housing market and evaluates the effectiveness of the tax-sharing reform in regulating speculative practices. While the reform exhibited positive outcomes in the past, this study argues that its applicability in the present scenario warrants scrutiny. The evolving market dynamics and contextual factors necessitate a reevaluation of the policys effectiveness. Taking a balanced approach, the paper critically examines the benefits and drawbacks of the tax-sharing reform in the context of the current housing market challenges. Additionally, the study presents the authors perspective on the reforms limitations and proposes alternative policy suggestions to address the persisting issues more effectively. By offering insights into the reforms impact on the housing markets development trajectory, this research aims to contribute to a more nuanced understanding of the relationship between fiscal policies and the Chinese housing market. The paper uses qualitative method and case study to illustrate the topic.