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China to stand firm on property controls

(Xinhua)

10:30, June 09, 2012

BEIJING - China is not likely to loosen the reins on its property sector soon despite expectations for policy easing, analysts said after central authorities recently dampened hopes for let-up of controls.

The government remains wary of a real estate bubble and has more incentive to counter the economic slowdown than to stimulate property investment, according to government advisors and observers.

The Ministry of Housing and Urban-Rural Development (MOHURD) on Tuesday reaffirmed that it will stick with its property cooling measures. It also vowed to instantly remedy improper policies at the local level.

The announcement came after many cities attempted to ease property regulations in recent months, fueling widespread predictions of loosening controls nationwide.

More than 30 cities have implemented easing measures, such as subsidizing purchases of refurbished houses and allowing first-time home buyers to borrow more from the public housing fund since the second half of 2011, data from the Beijing-based Centaline Property showed.

"The ministry's announcement signals that cooling the property sector will be a mid- and long-term policy," said Yi Xianrong, a finance researcher with the Chinese Academy of Social Sciences, a government think tank.

"It actually indicates the direction of real estate policies for the next set of government leaders," Yi said.

Market expectations for slackened regulations were mainly based on the fact that China's economy has been under increasing downside pressure, while property investment has fueled the country's economic engine.

China's gross domestic output increased 8.1 percent year on year in the first quarter of 2012, the slowest rate in nearly three years, while the European sovereign debt crisis continues to threaten growth.

Real estate development accounts for more than a fifth of China's fixed-asset investment, making it a major driver of economic expansion.

"There is enough room for other tools to stabilize growth. There is no need to resort to the property sector," Xuan Yu, a researcher with the China Center for Economic Research at Peking University, wrote in an article published Wednesday.

To support the slowing economy, China's central bank on Thursday cut benchmark lending and deposit interest rates by 25 basis points, the first rate cut since late 2008.

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