Beijing urges restraint on peninsula

Beijing has again urged restraint and suggested that nations involved to give serious consideration to its proposal of “dual suspensions” after the Democratic People’s Republic of Korea’s seemingly failed missile launch on Wednesday.

Describing the Korean Peninsula’s tensions as pushed to the brink, Foreign Ministry spokeswoman Hua Chunying in a daily news conference in Beijing called for all parties involved to avoid taking actions that are provocative, risky or that may cause miscalculation.

Media reports quoted military sources of the Republic of Korea and the United States as saying they detected what appeared to be the explosion of a missile soon after its launch in the DPRK on Wednesday.

The failed launch came amid the ongoing large-scale joint military exercises between the ROK and the US.

Calling for all parties to do more to ease tensions, Hua said China’s approaches of “dual suspensions” and “dual tracks” are “correct, objective, fair and reasonable” plans to find away out of the dilemma.

The “dual-suspension” approach calls for the DPRK to halt its nuclear and missile programs and the US and ROK to halt their joint military exercises at the same time.

The “dual-track” approach calls for the parties to work on denuclearizing the peninsula and establishing a peace mechanism.

“It is better for the doer to undo what he has done,” Hua said, pointing out that the crux of the Korean Peninsula nuclear issue lies in the contradictions between the DPRK and the US and ROK, as well as in the “deep-rooted hostility and mistrust” between them.

Any unilateral actions taken for the sole purpose of pursuing one’s own absolute security or ensuring one’s own interests will only further complicate the issue, Hua said.

“We must address both the symptoms and the root cause and find a solution that takes care of all parties’ reasonable security concerns,” she said, adding that China’s approaches are “worth being highly valued and carefully considered by all parties under current circumstances”.

City governments across China have thrown everything but the kitchen sink at their real estate sector in an attempt to dampen demand and prevent a bubble from developing in the property market.

In the first two months of this year, China’s real estate investment increased 8.9 percent yearon-year to more than 985 billion yuan ($143 billion), and sales jumped 26 percent to over 1 trillion yuan, according to the National Bureau of Statistics.

Despite the mild increase in home prices, as noted by the NBS, those who are selling or buying homes in big cities such as Beijing have actually found that prices have risen strongly in recent months. This fast rise, reported by the media, has further prompted potential buyers to swarm into the market, which in turn has further pushed up prices creating, in the process, a vicious circle.

The city governments cannot sit idle as complaints from potential homebuyers, especially young people, continue to pile up. This month, Beijing and dozens of second-tier cities and cities neighboring Beijing and Shanghai imposed restrictions on housing purchases to cool their property markets, by either limiting the number of houses that can be owned by local residents or raising the percentage of down payment to make it financially more difficult to buy a second apartment.

The policies have to be tightened because in the recent increases in housing prices one can see the initial signs of a bubble. If the situation continues to worsen, it could jeopardize the country’s financial security, because the bursting of any bubble will lead to a crisis, as the histories of other countries, such as Japan, show.

Some argue that the situation in Japan 20 years ago and that in China today are quite different and therefore cannot be compared. But even if we rule out the possibility of a bubble-burst, the soaring housing prices have put heavy pressure on young people, sharply raised the cost of manufacturing and other sectors, and risked guiding too much capital into the real estate sector instead of the real economy, as Vice-Premier Zhang Gaoli warned at the China Development Forum over the weekend.

While restricting property deals from the demand side is necessary, perhaps policymakers can more effectively tackle the problem from the supply side. In the past decade, several rounds of demand-side regulations were issued to impose restrictions on purchase. But instead of meeting the intended purpose of moderating housing prices, the restrictions, when eased, resulted in raising property prices.

China’s real estate and related sectors account for a large proportion of fixed-asset investment, which is a major driving force for national economic growth. It will be difficult for the authorities to restrict property buying for long, because it will affect growth and employment, two factors high on the agenda of the central as well as local governments.

As we’ve seen in recent years, as economic growth slows down, policymakers will ease the restrictions on property buying, leading to an increase in realty prices.

Major cities like Beijing and Shanghai have been reducing the acreage of land for real estate development in recent years, thus restricting the supply of houses to change the demand-supply relationship. As a result, experts have attributed the current rise in prices to the reduced availability of land for construction, and called for more supply of land.

Obviously, if land supply continues to decrease, the surging demand may be repressed for some time, but once the restrictions are eased, there may be another round of demand-driven price rise, which could take the sector to a stage where the bubble could burst and neutralize the efforts of the policymakers.

It is time policymakers adjusted their regulation strategy and adopted a more balanced regulatorymethod to ensure housing prices ease gradually without causing any social or economic side effects.

SHI YU / CHINA DAILY