Central bank: Economy to slow down slightly
(Bloomberg/chinadaily.com.cn)
Updated: 2006-08-10 09:51
Capital Outflows
China's economy expanded 11.3 percent in the second quarter, fuelled by
surging exports and spending on new factories and real estate. Fixed-asset
investment rose 30 percent in the first half from a year earlier, the most since
the first quarter of 2004.
"We will use various monetary tools to reasonably control lending growth and
prevent the economy from overheating," the central bank said. "We will speed up
the implementation of the policy of boosting domestic spending and adjusting the
economic structure to promote the balance of international payments."
The central bank said it will "adjust the bias in the management of foreign
exchange which currently encourages foreign-exchange inflows and restricts
outflows."
The government is loosening controls after China's foreign-exchange reserves
doubled in the past two years to become the world's largest, reaching US$941
billion at the end of June.
Citigroup Inc., the world's largest financial services firm, said Wednesday
it won approval to convert yuan deposits into foreign exchange for investment
abroad under a qualified domestic institutional investor program. Since April,
China gave six institutions approval to invest a combined US$8.3 billion.
Tax Rates
The central bank said the exchange rate alone cannot resolve the imbalance in
the country's trade and capital accounts.
China's current account surplus more than doubled to US$161 billion last
year, accounting for 7 percent of the nation's gross domestic product. The
central bank said on May 22 the nation will maintain a "relatively large" gap
this year.
The capital account surplus, which narrowed to US$63 billion in 2005 from
US$111 billion a year earlier, will also stay "relatively large," the bank said
that day.
The government will adjust preferential policies toward foreign companies,
speed up the unification of domestic and foreign company corporate income tax
rates and regulate policies by local government to attract foreign investment,
the central bank said in Wednesday's report.
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