2010: a dance with the tiger (2)

08:41, February 21, 2010      

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Tian didn't expect any major changes in terms of the exchange rate policy as long as the US dollar is relatively strong, and he said the government will likely adjust the enterprise tax so as to reduce the burden shouldered by companies.

The central government could possibly tighten real estate lending to local governments and smaller land-transfer fees could make local leaders frown, Tian predicted.

In the Global Risk 2010 report released at the world economic forum last month, a "hard landing in China" placed in the top three in terms of risks to global growth.

Tan Yaling, a Chinese finance specialist, said that the economy could be very strong in the first half of the year, but it could encounter more pressure in the second half of the year.

"Challenges and uncertainties remain, and they may be much more severe than last year," Tan said.

The government will be faced with pressure from the West to revalue its currency and has to deal with an increasing protectionism abroad.

If China does not raise the value of the yuan, the nation will be widely criticized for manipulating the currency, but if China raises the value of the yuan, hot money will flow into the market, she explained.

Sluggish property market

The Spring Festival has always been a slow season for housing sales. However, this year saw the most sluggish week of the property market across the country.

In Hangzhou, capital of Zhejiang Province, no transaction was made between February 13 and 18. Shanghai and Shenzhen also reported no property transactions. In Nanjing, capital of Jiangsu Province, only one apartment was sold during the same period.

In Beijing, transactions of second-hand apartments plunged by 70 percent between February 13 and 19, com-pared with the first week of the month.

"It is a natural phenomenon. On one hand, people bought houses at the end of last year before preferential polices ended; on the other, the New Year holiday is an off-season for the housing market," said Li Jingguo, a property researcher with the CASS.

The government issued a series of policies to boost the second-hand property market, including lifting the stamp tax on property purchase and the value-added tax of land on property sales.

But people can't enjoy the preferential taxation policy anymore. It was set by the State Council at the end of 2008 to reduce the impact of the financial crises, but it wasn't extended past the end of last year because the government wanted to cool the housing market.

China's central bank announced on February 12 to raise the reserve deposit ratio for financial institutions by 0.5 percentage points from this Thursday, in a move widely interpreted by insiders as a way to tighten the monetary policy.

By Song Shengxia/Global Times
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