Cabinet set to get tough on pricing pressures

15:28, October 28, 2010      

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More measures are to be taken to stabilize consumer prices and curb rapid increases in property prices in some cities, China's Cabinet said yesterday.

The comments signalled heightened official concerns over the risks of price pressures and asset bubbles as capital inflows rise, despite assurances from the country's planning agency that near-term inflation will remain under control.

Although the economy was performing as expected, policymakers faced "increased external challenges" due to the complex international environment, the State Council, or Cabinet, said in a statement posted on the government's website.

Stabilizing prices of vegetables and daily necessities will be high on the agenda, the Cabinet said after a meeting about economic plans for the fourth quarter.

Companies found hoarding or manipulating prices of agricultural commodities, mainly cotton, would be severely punished, it added.

Global and domestic cotton prices have hit record highs repeatedly in recent weeks, due partly to speculation.

"All regions and departments must seriously implement various controlling measures to resolutely curb the overly rapid rises in property prices in some cities," it said.

The government has taken numerous steps this year to rein in the red-hot property sector, including increases in mortgage deposits.

China's consumer price index hit a 23-month high of 3.6 percent in the year to September, and analysts said high inflation, coupled with rising asset prices, was a key reason for the central bank's surprise increase in interest rates last week.

China has set a 3.0 percent target for average inflation in 2010.

China's benchmark bond and bill yields were mixed yesterday, with the yield curve steepening amid worries over high inflation and possible further monetary tightening.

The Cabinet also said that it would step up management of local government financing vehicles, which officials say have become saddled with potentially bad debts.

Separately, the country's planning agency said that inflation will stay under control in coming months, while economic growth will remain strong as the private sector kicks into gear.

"China's economy is moving gradually towards a market-driven mode from a stimulus-driven one," the National Development and Reform Commission said in a statement on its website.

Growth in the third quarter was up 9.6 percent from a year earlier, well above the government's target of 8 percent for 2010, though down from 10.3 percent in the second quarter and the first quarter's 11.9 percent.

In some provinces, growth may slow further, partly due to pressure from Beijing to meet environmental targets through cutting emissions, the planning agency said.

By Zhou Xin and Kevin Yao, Shanghai Daily


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