Sunday, January 28, 2007

economy - Price cartel for Shanghai real estate

Shanghai's 42 real estate developers have set up a price cartel to prevent prices from dropping, writes the Shanghai Daily, quoting a statement at some of the major real estate websites. Here is how it works:
According to the statement, the firms, whose full names were not revealed, have agreed not to cut prices from now through December 1, 2008. In addition, every firm in the grouping should guarantee a monthly price rise of between 2 percent and 4 percent during the same period, regardless of their sales performance. Moreover, each company is required to pay 1.26 million yuan (US$161,530) in advance and any violation of the rules will result in its forfeiture.

The government is at last having some success in cooling down the real estate market and that will hurt some of the developers.
In China setting up such a price cartel is as illegal as in the US or Europe, but since some of the companies actually announce the alliance, they do think they can get away with it.

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