China to intensify fine-tuning, keep property curbs

China will intensify fine-tuning of policies as downward pressure on the economy is still “relatively large,” Premier Wen Jiabao said during a tour of Jiangsu province, the official Xinhua News Agency reported yesterday. Measures implemented since April are showing results and the economic slowdown is stabilising, he said. At the same time, the government will “unswervingly” continue its property controls and prevent prices from rebounding, Xinhua cited Wen as saying in its report yesterday. China on July 5 announced the second cut in benchmark interest rates in a month and allowed banks to offer bigger discounts on loans, stepping up efforts to reverse a slowdown in the world’s second-biggest economy. The move, which coincided with the European Central Bank’s decision to reduce borrowing costs to a record low, underscores the risks to the global recovery as the euro area’s fiscal crisis deepens, US employment gains falter and Asian expansion slows. “In April this year we announced we would put stabilising growth in a more prominent position and we intensified efforts to pre-emptively fine-tune policies,” Wen said, according to Xinhua. “Currently these measures have already seen some results and the economic slowdown has stabilised.” The pace of growth is “within the expected target zone set at the beginning of the year,” Wen said. “However we still face relatively large downward pressure.” The premier set a target of 7.5% growth this year, down from an 8% goal in place since 2005. The government will “continue to intensify pre-emptive fine-tuning and implement a proactive fiscal policy, especially with a focus on improving the structural tax reduction policy,” he said. Authorities will “continue to implement a prudent monetary policy and effectively solve the structural contradiction between the supply of and demand for credit,” he said. In a report on Saturday, Xinhua said Wen pledged to restrict speculative demand and investment in property and that this must be made a long-term policy. Local governments that introduced or covered up a loosening of curbs on residential real-estate must be stopped, Wen said on Saturday during a visit to Changzhou city in Jiangsu. Wen’s comments underscore the government’s determination to maintain restrictions on housing purchases even as it cuts interest rates and boosts infrastructure spending to reverse a slowdown in the world’s second-biggest economy. China’s new-home prices rose for the first time in 10 months in June, according to SouFun Holdings Ltd, owner of the nation’s biggest real- estate website. “We must unswervingly continue to implement all manner of controls in the property market to allow prices to return to reasonable levels,” Wen was quoted as saying on Saturday when he met residents and local government officials in charge of affordable housing. “We cannot allow prices to rebound, or all our efforts will come to naught,” he said. Market expectations about property prices are changing and citizens are worried prices will rise again, he said. Signals in the market are “chaotic” and misleading and speculative information must be stopped, Wen said, according to Xinhua. Shares of property developers listed in China rose the most in four months on Friday, the day after the People’s Bank of China announced the second cut in borrowing costs in a month. The stocks gained even as the central bank’s statement signalled property restrictions won’t be relaxed. The gauge tracking developers on the Shanghai Composite Index added 3.5%, the most since March and the biggest gain among five industry groups on the benchmark. China Vanke Co, the biggest listed developer on the mainland, climbed to the highest since November 2010. Poly Real Estate Group Co, the second largest, surged to the highest in two and a half years. “As long as there are no new curbs to come and it’s only the implementation of existing policies, home prices will still rise,” Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, said by telephone on Saturday. Wen called for the government’s differentiated mortgage policy and other restrictions on purchases to be maintained. His comments add to the PBOC’s July 5 warning to banks to stick to the government’s lending curbs. “All financial institutions must continue to strictly implement a differentiated housing credit policy to continue curbing property-buying for speculation and investment purposes,” it said in its statement announcing the interest- rate cut. China started imposing restrictions on home purchases two years ago as prices surged after the government started a stimulus package to shield the economy from the impact of the global financial crisis. Measures included raising down-payments and mortgage-rate requirements, limiting purchases in some cities and trialing a tax on homes in Shanghai and Chongqing. Property controls are still in a “critical period” and the task remains “arduous,” Wen said yesterday. Cases of illegal acquisition of property-rights must be investigated, he said. from gulf times.