China Local Governments Must Not Challenge Beijing on Property Curbs - Xinhua - Wall Street Journal

BEIJING--China's local governments must not challenge Beijing on property market controls, especially its limits on home purchases, the official Xinhua News Agency said in a commentary Wednesday.

Xinhua said that the decision to send inspection teams to 16 cities and provinces to review the performance of local governments in restraining the property market is a clear signal of Beijing's resolve.

"The inspections are a clear signal from the central government," Xinhua said. "They are a red line that local governments should not cross if they want to fine-tune the control measures."

China has imposed a series of measures in a two-year campaign to contain property price increases. It has squeezed financing for developers, raised down payments and slapped limits on home purchases.

But according to some analysts some 50 cities and provinces have tried to "fine-tune" the measures, offering tax breaks, pushing banks to lend at lower rates and allowing buyers to get more cheap credit from housing provident funds.

Beijing has reversed measures that it believes have crossed its "red line" though it has allowed local policies to stand if they appear to be aimed at helping first-time buyers and not speculators.

Shanghai, Wuhu in Anhui, Foshan in Guangdong and Chengdu in southwestern Sichuan are among the cities that have run afoul of the central government.

China is sending eight teams later this month to inspect the implementation of property tightening measures by local authorities, the State Council said in a statement Tuesday.

The teams will review home purchase limits and credit policies, and look into residential land supply and the implementation of tax policies in 16 cities and provinces including Beijing, Tianjin, Shanghai, Chongqing and Guangdong province.

The basic stance of maintaining property controls has never wavered, Xinhua said, using Beijing's tough rhetoric on measures to curb property price increases.

Local media Friday reported that the government issued an urgent notice saying China has told local governments to keep a firm grip on the housing market to prevent property prices from rebounding.

There has been heightened investor concern over the possibility of further tightening measures as China's property market has shown signs of a turnaround in recent months.

Sales from first-time home buyers and upgraders have picked up following more accommodative monetary policies and local adjustments to property curbs. Prices have rebounded in some cities.

Write to Liyan Qi at liyan.qi@dowjones.com