China will drastically raise land fees and taxes in an attempt to curb runaway investment, the authorities said yesterday.

Residents in Nanjing, capital of East China's Nanjing Province, walk past a newly-constructed apartment building May 10, 2005. [newsphoto]

In its latest directive, the Ministry of Land and Resources ordered that compensation be doubled for people displaced to make way for new developments.

The land use fee for new construction projects shall also be doubled, the ministry announced. The current charges vary from 5 yuan (63 US cents) to 70 yuan (US$8.78) per square metre.

The government also intends to triple tax on the use of urban land, which currently stands at 1.2 yuan (15 US cents) per square metre.

The ministry estimates that the new policy may push up the price of some industrial land by 40 to 60 per cent. But developers can absorb the rise, according to the experience in cities where the new policy has been tried.

The ministry said higher land prices and fees would check excessive redevelopment of land for industrial projects and force local governments to improve the viability of projects.

China posted economic growth of 10.9 per cent in the first half this year on the back of a 30-per-cent growth in fixed asset investment, both of which registered recent-year highs.

In a bid to prevent a possible economic crisis, the central bank raised the benchmark interest rate twice this year and the government has clamped down on unauthorized investment projects.

The government believes that checking excessive growth of credit and land supply could be an effective way of cooling the economy.

On Tuesday, the State Council, or the cabinet, announced macro-control policies aimed at tightening land supply.

Highlights include tougher punishment for local officials involved in illegal land transactions, more emphasis on safeguarding the interests of farmers losing their land, and a minimum price for industrial land.

The policy also strips local governments of their authority to spend the money from land sales, and orders that the revenue be incorporated into local budgets to allow supervision by higher authorities and local legislative bodies.

Under the policy, the government will raise taxes from investors for the use of land, which will be used for the protection and development of farmland.

And there will be a ban on leasing land from farmers for construction purposes, a back-door tactic increasingly used by some local governments and investors to dodge taxes on land sales and approvals by higher authorities.

"The solution to major issues in the economy lies in deepening reforms of the economic system, but for now, approaching the problems in land use is the most direct and efficient way," said Sun Wensheng, minister of land and resources.

(China Daily 09/08/2006 page1)