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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