Pilot project for property tax

For infrastructure construction in Xiongan New Area, public-private partnerships may be a good way to involve the private sector to build and/or improve infrastructure facilities and thus reduce the pressure on the government to keep on injecting capital to establish the new area.

Aside from individual operation of infrastructure projects, an integrated development model is also a good choice for streamlining overall urban planning.

However, a potential risk in encouraging PPPs to build public infrastructure is that it will increase the government’s burden of management, because the relationship between the local government and the companies in charge of construction will be totally dependent on contracts and economic ties. So before applying this mode, local authorities’ capacity should be carefully evaluated.

Xiongan New Area also offers a good chance to launch pilot projects for collecting property tax on residential properties used for commercial purposes. It’s highly possible that the local authorities will make efforts to offer affordable and low-rent housing to attract more talents and provide good living conditions for the residents, but they cannot control the entire local property market. So houses used as commercial properties will continue to be a part of the local real estate market, making it possible to launch the pilot property tax project. And if the pilot project is successful, it will open another channel of revenue for the local authorities and thus reduce their dependence on the sale of land-use rights to earn revenues.

Yang Yongheng, associate dean of the School of Public Policy & Management, Tsinghua University