Policy

China to enhance regulating property market

Date Dec 30 2010 17:06:25

Dec.30,2010(SHMET)--China will enhance regulating its property market in 2011 and strengthen implementation of the tightening measures already unveiled by the government, a senior official said Wednesday.

Jiang Weixin, minister of Housing and Urban-Rural Development, said at a national work conference that China would clamp down on speculative home purchases and curb excessive growth in property prices next year.

The country has rolled out a string of tightening measures to cool the real estate market in 2010, including suspending mortgages for third-home purchases, speeding up trials of property taxes and raising down payment requirements for first-home buyers, which have "helped contain speculative demand to some extent", Jiang said.

Further, Jiang noted that the ministry would assess local governments' performances in stabilizing property prices to ensure central government measures are properly implemented.

China will also continue to increase the land supply available for residential property and strengthen management of the Public Housing Fund in 2011.

The country built 5.9 million units of affordable housing and renovated 1.36 million dangerous rural dwellings in 2010, compared with the annual target of 5.8 million units and 1.2 units, respectively, Jiang said.

Further, China will increase the supply of affordable housing, renovate more shantytowns and develop public rental housing to solve the housing problem of middle- and low-income earners, the newly-employed and migrant workers, Jiang said.

Edited by SHMET

Car registration limit to vary each year

Date Dec 29 2010 09:17:29

Dec.29,2010(SHMET)--"Beijing will control the number of registered vehicles next year to 240,000. The number will be decided by each year's traffic capacity from now on," Li Xiaosong, deputy director of Beijing Municipal Commission of Transport said, The Beijing News reported Tuesday. 

According to Li, the traffic measures unveiled Dec 23 have undergone much consideration. "The city's vehicles increased to 2 million in 5 years while Japan took 22 years," he said.

City officials introduced 28 measures to ease congestion and ensure transportation safety in China's capital.

An authority with the commission told the reporter that though the number of registered vehicles will vary each year, the number of plates they allocate will be in accordance with the traffic measures, which reserve 88 percent for private cars, 10 percent for public cars and 2 percent for commercial use cars every month.

Edited by SHMET

Banking industry introduces director elimination mechanism

Date Dec 29 2010 09:15:07

Dec.29,2010(SHMET)--China's banking regulator has rolled out a regulation to assess the qualification of commercial banks' directors, requiring banks to promptly replace unqualified directors, the 21st Century Business Herald reported Tuesday.

The regulation, issued by the China Banking Regulatory Commission (CBRC), established the assessment and elimination mechanism for bank directors. It is the first such regulation by CBRC targeting individuals in company supervision.

Directors will be labeled qualified, basically qualified or unqualified. Basically qualified directors need to improve their performance within a set time if they want to maintain their positions.

The regulation also stipulates one person can not act concurrently as directors of competing banks. Currently, it is common for one person to serve as director of two or even more banks at the same time.

The CBRC will also release regulations on members of supervising committees and senior management in the future, the report said.

Edited by SHMET

Wen: We are beating inflation

Date Dec 27 2010 13:20:22

Dec.27,2010(SHMET)--The government will be able to keep inflation in check, Premier Wen Jiabao said on Sunday, after the central bank raised interest rates for a second time in just over two months.

The central bank raised one-year lending and deposit interest rates by 25 basis points on Dec 26, after issuing a statement posted on its website on Saturday.

Steps taken in the past month, including price controls to curb speculation and monetary tightening, have started to produce results, Wen said in a radio broadcast.

The central government has raised the reserve requirement ratio for banks six consecutive times and increased interest rates twice this year to absorb excess liquidity in the market to support healthy economic development.

The State Council, China's cabinet, has also been trying to rein in food prices by increasing production of vegetables and other basic goods.

"I believe we can keep prices at a reasonable level through our efforts. As a major leader of the government, I have the responsibility and I have the confidence, too," Wen said, referring to large grain reserves as well as moves to support production by reducing and waiving taxes.

The country is facing inflationary pressure as the consumer price index (CPI), a main gauge of inflation, accelerated to a 28-month high of 5.1 percent in November.

This is the second time the central bank hiked interest rates in 2010 after it raised the benchmark lending and deposit rates by 25 basis points on Oct 20, for the first time in about two years.

The country will bring its overall money supply to a normal level with a range of policy tools next year as the government shifts monetary policy from "moderately loose" to "prudent", the central bank said on Friday in a statement on its website, citing Hu Xiaolian, deputy governor.

Hu stressed that China is facing pressure due to excess liquidity from home and abroad, and for the next phase the government will work on liquidity controls with a range of policy tools, including open market operations, and adjusting interest rates and reserve requirement ratios.

Brian Jackson, economist with the Royal Bank of Canada, believes China will see another 75 basis points of rate hikes in 2011.

Wang Tao, chief China economist at UBS Securities, shared a similar viewpoint. "The average CPI will range from 4 to 4.5 percent in 2011, and the inflation risks will be manageable. We expect an increase in interest rates by 75 basis points next year."

The expectation of interest rate hikes next year, however, will also attract an inflow of overseas speculative money seeking quick returns.

According to the Yellow Book of the World Economy, published by the Chinese Academy of Social Sciences (CASS) on Sunday, the risk of deflation in developed economies and inflationary pressure in emerging economies will further intensify next year, resulting in capital flow from developed to developing countries.

The interest rate gap between the United States and India, for instance, has reached 6 percent, according to the book.

"The scale of hot money flooding into China will definitely increase next year, due to the interest rate gap and the expectation of renminbi appreciation," said Zhang Ming, a senior research fellow of CASS.

"Stock and property markets are still the two major fields for the inflow of speculative money. China thus faces more pressure in containing asset price growth next year," he added.

Foreign investment in China's property sector rose 48 percent to $20.1 billion in the first 11 months of 2010, the Ministry of Commerce said on Dec 15. This is almost three times the 17.7 percent increase in the country's total overseas capital inflow.

"The climbing interest rate and a stronger yuan will definitely make the mainland a more attractive destination for us, but we will not change our investment strategy right now as we are a long-term investor," said a managing director at a US-based real estate fund.

Li Daokui, an academic member of the central bank's monetary policy committee, said the inflow of hot money is not expected to have a major impact on China, given the scale of the country's economy and controls on capital flows.

International Monetary Fund statistics show that China will replace Japan this year as the world's second largest economy in terms of its overall GDP.

Edited by SHMET

China raises interest rate second time this year to curb inflation

Date Dec 27 2010 13:19:37

Dec.27,2010(SHMET)--China's central bank announced Saturday that it will raise the one-year lending and deposit interest rate for the second time this year, as the government continues its battle against surging prices.

The People's Bank of China (PBOC) said in a statement posted on its website that it will hike the benchmark interest rate by 25 basis points beginning Sunday, which raised the one-year lending rate to 5.81 percent and one-year deposit rate to 2.75 percent.

The PBOC increased the benchmark lending and deposit rates by 25 basis points on Oct 20, which was the first increase in nearly three years.

The rate hike came after the central bank vice governor, Hu Xiaolian, said Friday that China would bring its overall money supply to a normal level using various policy tools, as the government shifts monetary policy from "moderately loose" to "prudent" to rein in rising inflationary pressures and curb asset bubbles.

The country's consumer price index (CPI), a main gauge of inflation, accelerated to a 28-month high in November of 5.1 percent, while new loans reached 7.45 trillion yuan in the first 11 months of this year, compared to the government's full-year target of 7.5 trillion yuan.

A recent PBOC survey also showed that the proportion of Chinese citizens satisfied with the current price level had sunk to an 11-year low, and only 17.3 percent of the consumers said they intended to consume more in the future.

Rising prices have prompted the government to take measures to rein in the hikes, including boosting supplies and providing financial aid to the needy.

Li Daokui, a member of the monetary policy committee with the PBOC, said the rate hike mainly aimed at managing inflationary expectations and reflected the policy shift, as tightening the money supply is the best way to curb inflation.

The rate increase came "at the right time", as western countries are celebrating the Christmas holiday, to avoid overreaction from the global markets, Li added.

Besides interest rate hikes, China had increased the bank reserve requirement ratio six times in 2010 to 18.5 percent and 19 percent for some large commercial banks.

"The decision was made in consideration of China's economic condition next year," said Lian Ping, chief economist with the Bank of Communications, the country's fifth largest lender, who described fighting inflation as the central bank's primary task at present.

Lian expected inflation to continue to go up in the first quarter next year due to rises both in demand and cost, as well as other influences from the external market.

His views were echoed by Zhuang Jian, chief economist with the Asian Development Bank, who also attributed rising inflation to holiday seasons and the extreme winter weather.

Observers believe that further rate hikes are to be expected since solving inflation and liquidity pressure at the same time is considered a difficult task.

"You cannot expect one or two rate rises to have a significant impact on economic indicators," said Zuo Xiaolei, chief economist with Galaxy Securities.

However, Lian said China only has room for two or three rate hikes, as higher interest rates would increase risks of "hot money" inflows due to a widening interest margin between China and the United States, which is likely to keep rates low.

Li Daokui also attributed the timing of the rate increase to avoiding rapid capital inflows.

But currently the factors that decides the direction of capital flows are currency exchange rates and assets prices, Lian added.

UBS Securities economist Wang Tao said last month that she expected the central bank to raise the interest rate by 25 basis points before the end of the year and by another 75 basis points in 2011.

China's economy grew 9.6 percent year-on-year in the third quarter this year, slowing from the 10.3 percent increase in the second quarter and 11.9 percent in the first quarter.

The country targets about a 3 percent inflation rate in 2010.

Edited by SHMET