After-crisis macro control: Proactive policy adjusted

16:58, December 10, 2009      

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Beijing has moved to support its economic recovery by extending in 2010 tax cuts and subsidies for purchases of small vehicles and electric appliances, while adjusting other measures to counter soaring home prices.

Although the top leaders have promised to stick to a relatively pro-consumption fiscal and monetary policy to augment nascent recovery, the State Council, the highest governing body, has taken steps to curb any bubbles from building up, which might add to inflationary pressure or incur bad loans to the balance sheets of State-run banks.

The State Council statement posted online Wednesday says the government should continue its current policies, including subsidies, to push consumption.

A tax cut on sales of cars with engines of 1.6 liters or smaller was extended until the end of 2010, but the tax was raised to 7.5 percent from the current 5 percent. The 2.5 percent rise of the taxation is expected to weigh on auto sales next year.

Subsidies would be raised from the current rate of up to 5,000 yuan ($880) to as high as 18,000 yuan ($2,600) for purchases of some vehicle models. But they do not apply to any vehicles with engine capacity bigger than 2 liters.

In a move aimed at countering speculation in real estate that has drawn complaints that housing prices are becoming unaffordable for many families, the government reintroduced a 5.5 percent business tax on sales of homes bought less than five years earlier.

The tax had been suspended in January 2009 as property sales slumped as the economy slowed down due to the global financial crisis.

China's inflation rate has remained moderate this year, with the consumer price index falling 0.5 percent in October from a year earlier. But officials have said they will adjust credit regulation and other policies to counter price pressures in some sectors if needed.

People's Daily Online – Agencies
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