Yiwu's predicament

Despite the recent rebound in sales and prices, the current property restrictions have already led to plunges in some local governments' incomes, much of which come from fees charged on land sales.

In some cases, officials have responded by relaxing the restrictions, often doing so in secret. On Tuesday, the media reported that the government of Yiwu, a city in Zhejiang province, ceased imposing purchase limits on houses at the beginning of the year.

In March 2011, the Yiwu government stipulated that city residents could buy no more than a single new house from March 21 to the end of the year.

Yiwu is among 46 Chinese cities that set limits on housing purchases in 2011.

In Yiwu, the limit was not extended after 2011, although the central government has asked local governments that have adopted the restrictions to keep them into 2012.

A day after the reports about Yiwu emerged, a local official said the city's restrictions had not been "canceled". Rather than that, he explained, no new policy has been adopted to replace the old one. Asked why it took seven months to devise something new, the official said the process of crafting such a policy was "sinuous".

Gu said Yiwu's tardiness should be considered in the light of its fiscal situation. In the first half of the year, the number of house sales that took place in Yiwu decreased by 20 percent year-on-year.

The sharp decline could seriously reduce the amount of revenue the Yiwu government collects. A report by the Chinese Academy of Social Sciences estimated that local governments obtain between 40 and 60 percent of their income from the fees they charge on land sales.

zhengyangpeng@chinadaily.com.cn