Real estate policy
The State Council declared its readiness last Wednesday to use a combination
of tax, credit and land policies to ensure the healthy development of the real
estate industry, which many economists say is showing signs of overheating.
An executive meeting of China's cabinet chaired by Premier Wen Jiabao vowed
to take necessary measures to improve the property market and curb price
increases in major cities.
After earlier macro-economic policies brought "the momentum of high
investment growth and housing price increases basically under control," the
meeting zeroed in on remaining problems.
"Housing prices are still rising too quickly in some major cities," officials
at the meeting warned. "Order has yet to be restored in the property market."
Currency strengthens
The Chinese currency strengthened last Monday to below 8 yuan against the US
dollar for the first time since last July's revaluation.
The Shanghai-based China Foreign Exchange Trade System reported the daily
benchmark, or the central parity rate for the US dollar, at 7.9982 yuan, falling
below 8 yuan for the first time in 12 years.
The currency traded at a low of 7.9972 per US$1 last Monday, but ended at
8.003 by 5:30 pm.
Traders said the market movements show the renminbi exchange rate is more
flexible, despite some international criticism that the currency should further
appreciate.
Internet crackdown
The Ministry of Information Industry last week called for domestic companies
and industry associations to collaborate in cracking down on irregularities and
crime in the country's telecoms and Internet networks.
It will all be part of a wider campaign to "clear" cyberspace and telecoms
networks, Vice-Minister Xi Guohua said.
Operators and value-added service providers need to run their businesses with
a stronger sense of social responsibility, he added.
Despite the booming Internet and telecoms industries, Chinese users are
becoming increasingly frustrated with problems such as pornography, gambling,
spam, and fraud, all of which have been spreading across the Internet and mobile
phone networks.
Global organization
The Ministry of Commerce said last week that China will start negotiating to
join a global organization that will allow its firms to bid for government
contracts around the world.
Vice-Minister of Commerce Yu Guangzhou said the country would join the
Government Procurement Agreement (GPA) by the end of year.
When China joined the World Trade Organization in 2001, it promised to
initiate negotiations for membership in the GPA "as soon as possible."
The GPA allows companies from member economies to bid for government
procurement contracts in other member countries.
Monetary growth
Growth in China's money supply maintained high momentum last month, prompting
economists to call for a "moderate tightening" of the monetary policy to slow it
down.
The People's Bank of China said last week that the broad measurement of the
money supply, the M2, swelled 18.9 per cent year-on-year to 31.37 trillion yuan
(US$3.92 trillion) at the end of April.
The growth rate was 4.8 percentage points higher than the same period last
year.
The central bank has set an M2 growth target of 16 per cent this year.
Bilateral ties
China and Russia agreed last week to build a bridge over the Argun River,
which forms a natural border between the two countries, and set up a working
commission on immigration as part of efforts to promote bilateral ties.
The agreements were signed after Foreign Minister Li Zhaoxing held talks in
Beijing with his Russian counterpart, Sergey Lavrov.
Both also pledged to work together to complete the demarcation of their
borders by the end of next year.
Consumer spending
China's retail sales rose 13.6 per cent in April from the same month a year
ago. It was the fastest increase in more than a year, due mainly to rising
incomes.
Retail sales reached 577.5 billion yuan (US$72.2 billion) last month, as
consumers spent more on items such as clothing, jewellery and cars, figures
released last week by the National Bureau of Statistics show.
April's retail growth was the biggest since March 2005, after adjusting for
distortions caused by the week-long Lunar New Year holiday, which fell in
January this year and in February in 2005.
A-share issuance
Bank of China Ltd (BOC) said last Wednesday it plans to issue a maximum of 10
billion A-shares, following its ongoing global offering of H-shares, in an
effort to collect no more than 20 billion yuan (US$2.5 billion). BOC Chairman
Xiao Gang said the issuance of A-shares will be completed by July 2007, adding
the issuance of A-shares will not harm the interests of H-share holders.
Under the regulations of Hong Kong Exchanges and Clearing Ltd, BOC can issue
its A-shares six months after its global offering of H-shares. BOC's Hong Kong
public offering commenced last Thursday, and trading of the bank's H-shares on
the Hong Kong stock market is expected to begin on June 1.
Interest tax
China will not abolish the interest tax any time in the near future, Liu
Shangxi, deputy director of the Research Institute of Fiscal Sciences under the
Ministry of Finance, said last week. Interest tax plays a role in narrowing the
income gap by using the collected money to improve the lives of those with lower
incomes, said Liu.
China launched the interest tax on November 1, 1999, in a bid to expand
domestic consumption. The 20-per cent tax rate has not changed in nearly seven
years. Some experts believe that with price increases and low interest rates for
deposits, the interest tax provides less and less profit for deposit
owners.
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