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China approves testing property tax in 2 cities

Associated Press Modified: January 27, 2011 at 8:38 am •  Published: January 27, 2011

BEIJING (AP) — China is launching property taxes in two major cities to help curb surging prices, with the plan to go nationwide "when conditions are ripe," the finance ministry said Thursday, part of a broader effort to control high inflation.

China's commercial capital, Shanghai, and the southwestern city of Chongqing announced plans for the taxes Thursday night.

Surging housing costs across China are hurting the government's efforts to cool inflation that has mainly been attributed to surging food prices but is spreading to other parts of the economy.

Thursday's move comes a day after the government made its latest attempt to cool the property market, announcing it would require buyers of second homes to make a 60 percent down payment, up from 50 percent.

The property tax news comes just before China's biggest holiday of the year, Lunar New Year, which begins next week. State media tried to soften the news by reminding citizens that people in other countries such as the United States pay property taxes as well.

"The collection of property taxes helps balance the distribution of income and narrow the gap between rich and poor," said the finance ministry statement, posted on the ministry's website.

The property tax plan was widely expected, and had been weighing on the minds of investors for some time.

"Since they did not know what policies would come out, people were too worried. Now the policies have come out and that will be to everyone's benefit," Chen Jie, director of the Center for Housing Policy Studies at Shanghai's Fudan University, said in an interview on the local state-run TV news channel.

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