Land allotment

The Ministry of Land and Resources said last Wednesday that a ban on land allotment for building villas would be strictly implemented, in order to further support recent government moves to cool down the property market.

The ministry urged governments at various levels to immediately halt the approval of land for villa construction and commence structural adjustments of the land supply.

Although a ban on land approval for villas was imposed three years ago, when Beijing was attempting to slow the rise of several macro-economic indices, nationwide implementation has been inconsistent.

Property policy

The State Council, China's cabinet, has decided to significantly tighten the rules on mortgage down payments and housing transactions, in an effort to cool down the country's overheated property sector.

A statement issued last Monday said that as of June 1, the minimum down payment for a new apartment larger than 90 square metres would be raised from 20 per cent to 30 per cent.

The ratio for an apartment smaller than 90 square metres will remain unchanged at 20 per cent, in order to cater to the needs of middle- and low-income groups, the State Council said.

Excessive investment, loans

The People's Bank of China, the central bank, last week warned of excessive investment and loans throughout the country, and pledged it would take active measures to curb this trend.

China's financial institutions granted 1.26 trillion yuan (US$157.5 billion) in loans in the first quarter, up 519.3 billion yuan (US$64.9 billion) from the same period last year, according to the central bank's quarterly monetary policy report.

The country's outstanding loans had grown 14 per cent year-on-year to 21.9 trillion yuan (US$2.7 trillion) by the end of March. The central bank attributed this growth to a surge of fixed asset investments based on a flood of new construction projects in the first quarter, as well as commercial banks' increased willingness to lend, due to improved capital adequacy.

Electronic system

China plans to introduce an electronic system for trading dollar-denominated bonds, as a means of developing a domestic market for foreign-currency debt securities.

The China Foreign Exchange Trade System and the National Interbank Funding Centre markets for trading foreign currencies, bonds and other related securities said they are preparing to offer the system to their members in Shanghai. The statement, posted on their Chinamoney website last week, did not provide any further details.

The country is now promoting a foreign-currency bond market, so local banks can use US dollars, rather than sell them to the central bank.

Auto sector measures

China will introduce measures to trim overcapacity in the auto sector and promote local brands, the industry regulator said last week.

Sources from the National Development and Reform Commission said annual sales for all carmakers in China must reach four-fifths of their manufacturing capacity if they want to build plants in other cities.

All new vehicle manufacturers will also be required to produce Chinese-brand vehicles, sources said. If carmakers intend to invest in different product categories from their current offerings, these should include domestically developed brands.

Oil plan

Shanghai Futures Exchange, the country's only exchange for metal and energy contracts, has developed an ambitious plan to introduce new oil-related products that meet the needs of heavy energy users such as power companies and airlines. The new strategy was issued in response to wildly fluctuating international oil prices.

The exchange is also contemplating measures to open the futures market to more financial institutions and foreign investors.

Increasing consumption of oil and other raw materials to fuel China's rapid economic growth, particularly copper, is widely seen as having a direct influence on world prices.

Northern development

Vice-Premier Zeng Peiyan last Tuesday said that development of Binhai New Area in North China's Tianjin Municipality must be accelerated.

"Development of Binhai New Area is a task of strategic importance in China's overall economic and social development. Its development will promote the growth of Beijing and Tianjin, Hebei Province and areas around the Bohai Sea," Zeng said at a meeting organized by the State Council to promote the zone's development.

Binhai New Area should become an open gateway to China's northern regions, a modern manufacturing and research base, and an international shipping and logistics centre, he said.

Gov't auto purchases

The government is expected to spend 70 billion yuan (US$8.75 billion) to purchase vehicles this year, said an official with the China Machinery Enterprise Management Association.

Zhu Jinping, the association's deputy secretary-general, revealed last week that the Ministry of Finance had earmarked 300 billion yuan (US$37.5 billion) for government procurement this year, with 70 billion yuan (US$8.75 billion) assigned to vehicle purchases.

Government expenditure on vehicles has grown steadily in the last three years, from 35 billion yuan (US$4.4 billion) in 2003 to 60 billion yuan (US$7.5 billion) last year.

Tax breaks

In accordance with international practices, the government is considering tax breaks for charitable donations, the Ministry of Civil Affairs said last week.

"We are negotiating with taxation and financial departments to set up a new tax reduction system for donations," said Jiang Li, vice-minister of Civil Affairs.

According to the current tax law, corporate donations can be exempted from income tax only when the amount is within 3 per cent of a company's annual revenue; the ratio is 30 per cent for individuals. This means that the more one donates, the more tax they have to pay.

"New policies will encourage companies and individuals to donate," Jiang said.

Agricultural exports

The Ministry of Commerce last Monday urged exporters of domestic farm products to strengthen food inspections, in a bid to deal with Japan's new law on food imports.

The Japanese Government said the "positive list system" law, which took effect last Monday, includes new tests for pesticides and other chemicals. The law is aimed at improving the quality of imported food and banning the excessive use of fertilizers and pesticides on agricultural products.

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