News Briefs

China to raise deposit reserve requirement ratio by 0.5 percentage points

The People’s Bank of China (PBOC), the central bank raised the deposit reserve requirement ratio (RRR) for financial institutions by half a percentage point from May 10.

The ratio for the rural credit cooperatives and rural banks would remain unchanged at 13.5 percent, said the PBOC in a statement on its website.

However, the RRR for other small financial institutions would rise to 14 percent, and that for large financial institutions to 17 percent.

This is the third rise in the deposit ratio this year. On Jan. 12 and Feb. 17, the central bank raised the deposit ratio by half a percentage point each time.

The PBOC cut the bank reserve requirement ratio four times during the second half of 2008 to stimulate growth.

Gov’t pledges support for FDI

China regards all foreign enterprises with operations in the nation as equal with their local counterparts, and the government will make all efforts to assist and support foreign businesses, Ma Xiuhong, vice-minister of commerce, said on May 9.

Ma made the remark during the Symposium for Multinational Companies 2010 taking place in Beijing.

The Chinese government launched guidelines on how to improve the environment for foreign direct investment in early April.

However, during the forum on May 9, representatives of some multinational companies operating in the country expressed concern about the implementation of the rules and regulations mentioned in the guidelines.

They also raised a number of issues including intellectual property rights, equal treatment and preferential policies.

“It (the concern) is understandable, but I believe it will disappear gradually as we are all actively considering how to implement the relevant rules,” said Ma.

China’s central bank warns risks by European sovereign debt crisis

China’s central bank warned on May 10 the European debt crisis might pose a challenge to the world economy and that China faces rising inflationary pressure.

Europe’s debt crisis, which affected directly economic growth in the Euro zone, had created major uncertainties for the global economic recovery and led to a chain reaction and posed a systemic risk to the world economy, said the quarterly monetary policy report published on the People’s Bank of China website.

It also warned of increasing price pressures for China due to rising commodity and labor costs and ample liquidity in the global market.

“The potential threat to price stability is increasing”, the report said.

However, the report said China’s economic recovery was further consolidated, and that urbanization and improved consumption were expected to be the new momentum to push the economic growth.

The central bank would keep its moderately easy monetary policy and strengthen flexibility to changing circumstances, and it would intensify management of liquidity, said the report.

China likely to levy carbon tax around 2012

China is likely to levy a carbon tax, an environmental tax that is paid for carbon emissions, on its enterprises around 2012, in a bid to encourage the country’s energy saving and environmentally friendly industries, the Economic Information Daily reported on May 11.

Enterprises including coal, natural gas and oil companies would have to pay carbon tax in accordance with their carbon dioxide emissions, while energy saving and environmentally friendly industries are likely to be subsidized.

Considering the relatively low tax income of local governments, the central government should share the tax with local governments, with 30 percent going to the latter, the newspaper said, citing an unnamed expert.

Individuals who create carbon emissions by using coal and natural gas in their daily life won’t be taxed.

China frets over rising capital inflow pressure

Capital inflows are placing big pressure on China this year, as domestic companies and banks repatriate large volumes of foreign currency, a senior official said in remarks published on March 17.

Guan Tao, who heads the international balance of payments department at the State Administration of Foreign Exchange, said that ultra-low interest rates in the United States were also fuelling a global dollar carry trade that was channeling more funds to China. Guan suggested that Chinese players were the main drivers of these flows, looking to take advantage of both yuan appreciation and low US rates.

China’s non-financial outbound investment rises

China’s overseas direct investment (ODI) from non-financial sectors totaled 11.4 billion US dollars in the first four months this year, the Ministry of Commerce (MOC) announced on May 17

In April alone, non-financial ODI stood at 3.88 billion U.S. dollars, up 35.7 percent from March, said ministry spokesman Yao Jian at a press conference.

Business volume in overseas-contracted projects in the first four months hit 23.08 billion US dollars, up 28.7 percent year on year, he said.

New contracts valued at 36.64 billion U.S. dollars were signed in the in January-April period, down 17.8 percent from a year earlier.

China’s non-financial ODI in the first quarter stood at 7.52 billion U.S. dollars, up 103.3 percent from the corresponding period last year, covering 957 overseas enterprises in 102 countries and regions, according to the MOC.

China to be world’s biggest luxury goods market in five years: blue paper

China will rank as the world’s biggest market for luxury goods in five years, a blue paper on China’s commercial development from 2009 to 2010 released in Beijing said on May 19.

Released by the Chinese Academy of Social Sciences, the blue paper said China’s luxury goods market had increased to 9.4 billion U.S. dollars by the end of 2009, accounting for 27.5 percent of the world’s luxury goods market and supplanting the United States as the world’s second largest luxury goods market

In five years, the market for luxury goods in China will reach 14.6 billion U.S. dollars, becoming the largest in the world, the paper predicted.

The paper said most luxury goods makers have opened outlets in Chinese metropolises and provincial capital cities.

With increased competition, however, some of the makers have opened outlets in smaller cities, too.

The paper quoted a Mckinsey & Company report as saying rich consumers in China are generally younger than those in other countries, although it gave no definition for such a consumer.

The report found 80 percent of China’s rich consumers are under the age of 45, while only 30 percent of such consumers in the USA and 19 percent in Japan are under 45.

The paper quoted the Hurun Report 2009 as saying the average age of people with personal wealth over 100 million yuan (USD 14.65 million) is 43 in China and those with wealth over 10 million yuan is 39.

In addition, the paper said young people born in the 1980s, especially those with wealthy parents, have a better awareness of luxury goods and are more likely to buy them.

China allocates 16.7 bln yuan for housing for low-income urban families

China’s central government has allocated 16.7 billion yuan (USD 2.45 billion) to help fiscally stretched local governments solve the housing problems of low-income urban families, the Ministry of Finance said on May 20.

The move came after Chinese Premier Wen Jiabao promised at the annual legislative session in March the nation would build 3 million low-cost apartments for low-income families and renovate 2.8 million shanty houses.

Governments at all levels are forbidden to hold back or misappropriate the funds, the ministry said in a statement posted on its website.

Local governments are not allowed to divert the funds to balance their budgets either, the statement said.

China has adopted a series of measures to cool the runaway property market and ease residents’ frustration with skyrocketing home prices.

The measures include increasing land supply for residential property, especially for small- and medium-sized apartments for low- and middle-income families.