George Liu's  Instablog

The Chinese government has issued a regulation requiring mainland property developers to pay a 20 percent land vacancy fee if they leave land vacant for over a year.

At first look, this development doesn't look much like a stimulus measure. However, upon closer inspection, this measure puts a damper on land speculation that is common amongst land developers. Unless the speculators believe that their land worth will appreciate more than 20% in one year, or appreciate significantly before a year, they will have little incentive to continue the rampant speculation that has inflated China's housing bubble. Moreover, cash-strapped developers that do not have the sufficient capital to embark on projects on vacant land they own will have to consider selling the land, thus potentially depressing land prices. So in essence, with this regulation, the Chinese government is looking to slowly deflate the housing bubble to a reasonable level, which is a much more appeasing approach considering the alternative could potentially be a full-blown housing crisis.