News

Beijing will not levy property tax before the end of 2011

Date Jan 28 2010 15:29:50 Source:Global Times
Beijing will not start to levy a property tax before the end of 2011 and tax experts predict that the tax rate will range from 0.5 percent to one percent, according to People.com Tuesday.

An official from Beijing Local Taxation Bureau disclosed that there''s still a long way to go before levying the tax. He explained that whether to levy the tax and how to operate and manage it will depend on the State Administrative of Taxation (SAT). But right now there is no definite plan from SAT, said the official from a panel discussion during the Chinese People''s Political Consultative Conference (CPPCC).

There are various plans about how to levy the property tax, but the basic mode is to assess a property according to its market capitalization and tax in proportion to a certain degree after a discount, said Hong Yamin, a CPPCC member who joined the preliminary research on property tax.

The property tax consists of the existing land-use tax and house property tax and the tax rate will be from 0.5 percent to 1 percent, said Liu Huan, a Beijing CPPCC member and vice president of the Institute of Taxation in the Central University of Finance and Economics. He added that the tax would start from commercial lands then to mansions, and residential houses would be the last.

The property tax will curb real estate speculation and puncture housing bubbles, which in turn will restrain house prices and make homes more affordable to general citizens, Liu analyzed

Chinese local govts mull raising minimum wages

Date Jan 28 2010 15:29:00 Source:Global Times

By Chen Yang

With China''s economic recovery on track, many local governments are mulling raising minimum wage levels as early as next month.

Beijing will raise its minimum wage level by 10 percent from the current 800 yuan ($117.2) per month as early as April 1, the Beijing Times quoted an anonymous official in Beijing''s Department of Human Resources and Social Security as saying Wednesday.

Provinces including Zhejiang and Sichuan as well as cities such as Chongqing, Guangzhou and Dongguan are also considering raising minimum wage levels, after Jiangsu Province initiated a minimum wage adjustment over the weekend.

The provincial minimum wage level will be raised by at least 12 percent starting February 1, the Department of Human Resources and Social Security of Jiangsu Province announced Saturday.

Jiangsu''s highest monthly minimum wage will be increased to 960 yuan ($140.64) from the current 850 yuan ($124.53), the same level as in Shanghai and Hangzhou.

The minimum wage level is usually adjusted every two years. The Ministry of Human Resources and Social Security issued a circular November 2008 freezing minimum wag-es at their current levels due to the global financial crisis. Currently the minimum wage ranges from 580 yuan ($84.97) to 1,000 yuan ($146.50) per month around the country.

"The economic recovery and inflationary pressure are encouraging more local governments to raise their minimum wage levels, and it will improve low-income groups'' living conditions and boost domestic consumption," said Hu Ronghua, a professor at Nanjing University of Finance and Economics in Jiangsu Province.

China reported an 8.7 percent year-on-year economic growth in 2009, and the Consumer Price Index also rose 1.9 percent in December from a year earlier, according to fig-ures released by the National Bureau of Statistics Thursday.

Hu said the wage adjustment would benefit low-income groups first, then boost domes-tic demand and the economy in the long term.

However, there is controversy over raising the minimum wage level in Dongguan, Guangzhou Province. Currently its minimum wage is 770 yuan ($112.81) per month.

Liu Zhigeng, secretary of the Dongguan Municipal Committee of the CPC, said at a seminar last week that Dongguan''s minimum wage level should be raised to solve the employment shortage problem.

Increasing raw material and labor costs will make it difficult for export enterprises to survive, said Liao Yongjia, manager of Dongya Group, a leather bag manufacturer, at the seminar.

"Dongguan''s minimum wage level is lower than those of Jiangsu and Zhejiang provinces and should be increased," said Li Youhuan, a researcher at the Guangdong Academy of Social Sciences. "But it is not a good time to raise it now, as many small- and mediumsized labor-intensive enterprises are still struggling to survive."

Li said raising the minimum wage level would not relieve the region''s employment shortage, as there are other factors such as technology requirements and social welfare limiting employees'' choices.

Hu said the government should cut taxes and offer subsidies to help enterprises reduce financial burdens from increasing labor costs.

Asian Rally Will Resume, Goldman, Credit Suisse Say

Date Jan 28 2010 15:24:24 Source:Bloomberg

By Shiyin Chen

Jan. 28 (Bloomberg) -- Asia’s stock market rally will resume after a “correction,” offering investors opportunities to increase holdings, Goldman Sachs Group Inc. and Credit Suisse Group AG said.

Goldman Sachs will start “extending a toe into markets” and Credit Suisse advised investors to start buying shares when the MSCI Asia excluding Japan Index falls to about 420, or 7.2 percent below yesterday’s close, when the gauge ended 9.6 percent below the 18-month high on Jan. 11.

“This is a healthy correction,” Nicholas Yeo, head of Hong Kong and China equities at Aberdeen Asset Management Plc, which oversees about $238 billion of assets globally, told reporters in Singapore. “This allows us to buy into some stocks that we’ve been eyeing but that have been too expensive.”

Asian stocks outside Japan yesterday dropped for an eighth day, the longest losing streak since March 2004, after U.S. President Barack Obama proposed measures to limit risk taking at banks and concern grew that China will tighten lending to rein in growth. JPMorgan Chase & Co. said Jan. 26 it’s turning “less bullish” on emerging-market stocks in first-half 2010, advising investors to consider put options, or bets that prices will fall.

“We view weakness in equity markets as a tactical correction, not the onset of a more significant fundamental downtrend,” Goldman Sachs analysts led by Timothy Moe wrote in a report dated yesterday.

The MSCI index climbed 1.9 percent to 460.96 as of 2:11 p.m. in Singapore.

Risk Appetite

Investors with a longer-term horizon or higher risk appetites should “scale in” to markets, while others should wait before the MSCI Asian index finds “firmer valuation support” at a price multiple of 12 times companies’ 2010 earnings, or a further 10 percent drop in prices, the Goldman Sachs analysts said. The gauge’s current multiple of about 13.5 times is “attractive” given the growth outlook, they said.

Credit Suisse analysts Sakthi Siva and Kin Nang Chik also said that valuations for Chinese stocks traded in both Hong Kong and Shanghai are lower than the 2007 “bubble.”

Investors should consider buying stocks when the MSCI Emerging Markets Index drops to 850, they said. The gauge yesterday closed 9.7 percent below its Jan. 11 high, close to the 10 percent threshold that would mark a so-called correction. It rose 1.1 percent to 939.13 in recent trading.

Aberdeen may add shares including Chinese consumer companies after the slump in prices trimmed valuations, Yeo said, declining to name any companies. The available liquidity may mean that prices won’t fall “too much,” he said.

China’s Consumption

“China’s consumption level is still low but that’s the area with the greatest potential,” Yeo said. He said on Jan. 21 investors should seek out stocks in defensive industries or of cash-rich companies as reduced stimulus and overcapacity prompt a correction in Asian equities.

Jardine Strategic Holdings Ltd., a company with interests in hotels, property and retailing, and China Mobile Ltd., the world’s largest phone carrier, were the top holdings in Abderdeen’s China Opportunity Fund as of Nov. 30, according to data tracked by Bloomberg.

Share markets in Hong Kong and Shanghai led the drop in Asia this year amid growing concern that China will rein in credit to curb inflation. The People’s Bank of China this month asked lenders to set aside more money as reserves following a record 9.59 trillion yuan ($1.4 trillion) of credit expansion last year.

China’s surge in loan growth may increase the risk of non- performing loans for Chinese banks over the next two to three years, Aberdeen’s Yeo said, adding that the investment company is continuing to avoid the largest Chinese lenders.

China Sees Pressure Over Yuan; May Adjust Stimulus (Update1)

Date Jan 28 2010 15:23:16 Source:Bloomberg

Adds economist’s comment in fourth paragraph.)

By Sophie Leung

Jan. 28 (Bloomberg) -- China faces increasing international pressure to allow the yuan to appreciate and may need to adjust some economic stimulus measures to ensure stability, a vice commerce minister said today.

The nation is experiencing growing difficulty in keeping policy consistency, Zhong Shan said in a statement on the Commerce Ministry’s Web site, without elaborating. Exporters may also face “more trade barriers ahead,” he said.

China is fighting criticism from countries including the U.S. that it’s keeping the yuan’s value artificially low, giving its exporters an advantage over other nations’. Central banker Zhu Min yesterday defended the nation’s “stable” yuan policy, and Premier Wen Jiabao said last month that China will “absolutely not yield” to calls for currency gains.

Allowing the yuan to appreciate “has become a consensus among policy makers, but the timing will depend on export performance,” said Wang Qian, chief China economist with JPMorgan Chase & Co. in Hong Kong.

China has kept a lid on its currency since July 2008 after it strengthened 21 percent against the dollar over the previous three years. Billionaire investor George Soros said yesterday China should let its currency appreciate “right now” to help smooth out imbalances in global trade and investment flows and prevent economic growth from accelerating too fast.

Economic Rebound

China’s economy rebounded more strongly than forecast in the fourth quarter, driven by an unprecedented $586 billion stimulus package and a credit-fueled investment boom. The inflation rate accelerated to a 13-month high of 1.9 percent in December, igniting speculation the government will abandon the yuan peg to avoid the economy overheating.

“Wen’s comments showed that China won’t appreciate the renminbi because of outside pressure, but rather domestic pressure and the nation’s own benefit,” Wang said. “The yuan’s appreciation will help boost residents’ buying power and domestic demand, reducing reliance on exports.” Renminbi is another term for the yuan.

China’s exports surged 17.7 percent from a year earlier in December, while imports rose to a record in a stronger-than- forecast trade rebound.

Stronger exports may fuel overseas calls for gains by the yuan against the dollar after policy makers halted appreciation for 17 months to help manufacturers weather slumping demand.

Wang said she expects the yuan to start appreciating at a gradual pace in the second quarter, gaining between 4 percent and 5 percent this year.

Rein In Liquidity

The People’s Bank of China on Jan. 12 increased banks’ reserve requirements for the first time since June 2008 and has also guided bill yields higher at auctions this year, suggesting that the government wants to rein in liquidity to limit the risks of real-estate bubbles and resurgent inflation.

“While China maintains its fiscal stimulus, it would mop up excess liquidity to adjust stimulus measures,” Wang said.

Chinese regulators began restricting new loans after a surge in bank lending since Jan. 1 and an unprecedented credit growth of 9.59 trillion yuan ($1.4 trillion) in 2009 fanned concerns of a property market bubble. China’s real estate data may be masking the degree that speculation is driving prices in some of the nation’s larger cities, the World Bank said Jan. 25.

Fed Keeps ‘Extended Period’ Pledge; Hoenig Dissents (Update1)

Date Jan 28 2010 15:22:17 Source:Bloomberg

(Adds markets in fourth paragraph.)

By Craig Torres

Jan. 27 (Bloomberg) -- The Federal Reserve kept interest rates near zero and restated its intention to cease buying mortgage-backed securities in March, while losing unanimity on how long to keep borrowing costs low.

At the same time, “the Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” the Federal Open Market Committee said in a statement today in Washington.

Policy makers are keeping interest rates “exceptionally low” for an “extended period” as they wind down the record amounts of credit they have provided since the bankruptcy of Lehman Brothers Holdings Inc. in 2008. Kansas City Fed President Thomas Hoenig dissented, saying “financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.”

Stocks fell in the minutes after the decision was released before recovering. Ten-year Treasury notes declined and the dollar gained. The Fed also repeated that it will close four facilities supporting money markets and bond dealers in February, as well as dollar swap programs with central banks in Europe and Asia.

The central bank is “prepared to modify these plans if necessary to support financial stability and economic growth,” the statement said. The Fed also said it is winding down the Term Auction Facility and will hold a final auction on March 8.

Return to Growth

Chairman Ben S. Bernanke, who tomorrow faces a procedural vote in the Senate on his confirmation for a second term, is looking for signs that the return to economic growth is generating jobs and is accompanied by an increase in credit to people and businesses. The U.S. unemployment rate held at 10 percent in December, while consumer credit dropped a record $17.5 billion in November.

“Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” the Fed said in its statement. Businesses “remain reluctant to add to payrolls.”

Verizon Communications Inc., coping with subscriber losses at its fixed-line phone business, said yesterday it will cut about 13,000 jobs at the division this year. Home Depot Inc., the world’s largest home-improvement retailer, also said yesterday it will pare 1,000 U.S. jobs.

Consumer Wealth

Stocks have provided no increase in consumer wealth this year. The Standard & Poor’s 500 Index is down more than 2 percent, and the Nasdaq Composite Index has lost more than 3 percent. Last year, the indexes rose 23.5 percent and 43.9 percent, respectively.

Officials kept their benchmark overnight lending rate between banks in a range of zero to 0.25 percent, where it has been for more than a year. Policy makers said that low rates are contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”

“Their forecast is for a subdued recovery and the data have been consistent with that,” Julia Coronado, senior economist at BNP Paribas SA in New York, said before the statement. “Retail sales edged lower in December, and credit is still contracting.”

Factory Capacity

Production in the U.S. rose for a sixth consecutive month in December, and housing markets are stabilizing. Industrial production rose 0.6 percent last month, pushing up factory capacity in use to 72 percent. That’s still below the average plant-use rate of 78.5 percent from 2000 through 2007.

“You have sustainable growth, but far below the trend rate” needed to lower unemployment, John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before today’s Fed decision. “I don’t see how the Fed is going to start raising rates with the unemployment rate at 10 percent.”

Home Sales

Sales of existing homes rose 4.9 percent to 5.16 million in 2009, the first gain in four years, the National Association of Realtors said this week. Fed officials will be watching to see if the end of their mortgage bond purchase programs hinders a recovery in housing.

The average rate on a 30-year fixed mortgage fell to 4.99 percent the week of Jan. 21 from 5.06 percent the previous week, according to Freddie Mac of McLean, Virginia.

The 56-year-old Fed chairman’s first four-year term expires at the end of this month, and the Senate hasn’t yet confirmed the former Princeton University professor for a second four-year term.

Bernanke has presided over two years of economic growth that were followed by a financial crisis that produced the worst recession since the Great Depression. The economy contracted at a 5.4 percent annual rate in the fourth quarter of 2008 and at a 6.4 percent rate in the first quarter of 2009.

Labor-Market Weakness

Employers cut 85,000 jobs in December, after revisions showed a gain of 4,000 in November, the first in almost two years. The unemployment rate held at 10 percent.

Wal-Mart Stores Inc., the world’s largest retailer, will eliminate about 11,200 jobs at its Sam’s Club membership warehouse clubs in the U.S. as it hires an outside company to demonstrate products.

Dallas-based financial services company Comerica Inc. said Jan. 21 that it plans to cut 300 jobs, or about 3 percent of its total workforce, this year.

U.S. central bankers forecast in November a slow decline in unemployment this year with the jobless rate averaging 9.3 percent to 9.7 percent in the fourth quarter, according to their central tendency estimates.

“We’ll definitely see job growth in 2010,” New York Federal Reserve Bank President William Dudley told the Nightly Business Report on PBS Television Jan. 13. “Whether it’ll be sufficient to bring down the unemployment rate, materially, remains to be seen.”