IN a radical attempt to remove a major element of the iron rice bowl, China has chosen four cities to test a US$950 million market-based housing scheme to end the costly obligation of state enterprises to provide virtually free housing to employees.
The scheme, if successful, will be extended to the rest of the country and will remove a key barrier to reforms of the moribund state sector, which has about 110 million employees on its payroll.
Backed by the World Bank, China's first fully commercial housing scheme will allow workers to rent and buy homes at reasonable prices.
The scheme means that: Joint-stock housing management companies will be set up in each of the four cities, with equity capital in the form of housing stock to be contributed by the participating enterprises.
The management companies will rent and sell flats at prices which recover costs, with priority for employees of participating enterprises.
Participating enterprises will adjust the cash wages of the employees to meet the average rent increase. This will convert what is now a benefit in kind to a monetary benefit - and the enterprises will no longer provide or maintain housing for their workers.
