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Reform Goal: Ending Subsidies : Some Raise Roof as China Raises Rents for Housing

December 08, 1987|DAVID HOLLEY | Times Staff Writer

YANTAI, China — The man in the lobby of the Yantai City Housing Exchange Office was in no mood to hide his anger.

"You Communist Party cadres just sit in offices and get high salaries, so you can afford to pay high rents," he half shouted at the office director.

"We workers do very heavy jobs and get only a little more pay than before, and the prices of things in the markets are getting much higher," he continued. "After 30 years, maybe I can afford to buy an apartment. But by then, I'll be too old. It's pointless!"

The frustrated 39-year-old shipyard worker used to consider himself lucky to be living in an unusually spacious apartment. But his family's good fortune turned sour in August, when their rent more than quadrupled under a reform program.

The program is aimed at turning housing--heavily subsidized ever since the 1949 Communist revolution--into a market commodity to be bought, sold or rented at prices reflecting its true cost.

The Yantai housing reform, personally endorsed by General Secretary Zhao Ziyang, head of the Chinese Communist Party, is meant to be the forerunner of changes to be implemented throughout China over the next decade.

The changes are sure to anger people like the shipyard worker. He now wants, at least, to be able to switch apartments with someone living in a smaller place, thereby reducing his rent.

Three months after registering with the housing exchange office, he still had not found anyone willing to trade. And he did not believe the center's director, who tried to convince him that under the reforms, he might be able to buy a suitable place of his own a few years from now.

But, despite the indignation the changes have provoked, China's reformist leaders are going ahead with their plans to eliminate one of the most fundamental welfare benefits of Chinese communism--extremely cheap urban housing--and replace it with a system similar, in many ways, to that of the United States or Western Europe.

Transition Not Easy

In a policy-setting report endorsed by the recently concluded 13th National Congress of the Chinese Communist Party, Zhao called on the nation to "energetically develop the building industry by commercializing housing, so as gradually to make this industry a major pillar of the economy."

China's leaders recognize that the transition will not be easy, but they believe that in the Yantai experiment, they have discovered the basic technique that will allow them to achieve this goal.

The official New China News Agency reported in September that Yantai, a bustling town on the northern side of the Shandong Peninsula, is "pioneering the nationwide reform."

The methods used in Yantai will be tried in four other cities by the end of this year and in another dozen cities during the first half of 1988, the agency said. The reform will begin in the big cities of Beijing, Shanghai and Tianjin in 1989 or later, it added.

Raising Rents and Wages

Yantai's reform is based on the principle of switching from the administrative allocation of housing to individual choice in the real estate market, while raising both rents and wages so that people eventually will pay prices high enough to cover the cost of new construction. As an intermediate step, subsidies will be provided in the form of housing coupons issued through work units.

The basic strategy, according to Qi Daomao, director of the Yantai City Real Estate Bureau, is to quickly create the structure of a commercialized housing market, even though subsidies cannot be eliminated immediately. Subsidies will be reduced later as wages rise, he said.

The goal of the reform, Yantai Mayor Yu Zhengsheng said, is to create a system in which "whoever builds the housing gets the benefit."

In socialist China, this concept is revolutionary.

"Our old policy increased the difficulties of solving our housing problems," Yu explained in a recent interview. "Various work units kept building apartments, but they couldn't get their investment back. Once the money was spent, it was gone.

"Housing costs were not part of people's consumption expenses, but rather were part of the nation's investment, or part of the investment by work units. This investment could not be recovered. This was the most basic difficulty of our old housing system. Now, we're trying to change this so that individuals pay for the investment."

Serious Malpractices

The old system also resulted in serious malpractices in housing allotment, Yu said.

"In the past, people with power could get more space," he said. "Because rent was very low, they could live in a very big home and it wouldn't cost much money. Because of this, China experienced very serious, unhealthy tendencies in housing. And the reaction of the masses was very fierce."

The belief of the angry shipyard worker that high-ranking party members could most easily cope with the reforms was based in part on this history of Communist Party cadres generally taking the best housing.

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