China Affirms Property Curbs Amid ‘Grim’ Outlook
China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy.
The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing. At the same time, officials will seek “steady and relatively fast growth,” Xinhua News Agency said.
Premier Wen Jiabao’s officials may limit the scale of monetary and fiscal easing to support growth as officials grapple with elevated house prices and local-government debt burdens after record lending in 2009 and 2010. So far, the government has cut banks’ reserve requirements, while leaving interest-rates unchanged at a three-year high.
“The authorities are cautious about a premature or aggressive easing of policy, while committed to be pre-emptive and flexible to roll out supportive policies if needed,” said Chang Jian, a Hong Kong-based economist at Barclays Capital, who formerly worked for the World Bank. “The policy focus will be shifting from managing inflation to supporting growth.”
Today’s statement didn’t include wording from last year, that stabilizing prices would take a “more prominent position” in policies. Inflation has cooled from a three-year high of 6.5 percent in July. Concerns this time included “latent risks” in the economic and financial systems.
A decline in a Chinese leading economic indicator suggests that growth will keep slowing in coming months after a 9.1 percent expansion in the third quarter, The Conference Board, a New York-based research organization, said today.
“Further policy easing will be needed,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd.
The People’s Bank of China may this week give loan data for November, after reports for trade, inflation and industrial production showed growth weakening. The money supply figures are not released to any fixed schedule.
In economic releases in Asia today, India’s benchmark wholesale-price data showed inflation eased to 9.11 percent.
Industrial production in Europe was unchanged in October from a month earlier and U.S. import prices increased 1 percent in November, according to economists’ median estimates ahead of reports also due today.
In China, the theme for next year is “progress amid stability,” Xinhua said. “Stability means to maintain macro- economic policies basically stable, maintain steady and relatively fast growth, keep overall price levels basically stable and maintain social stability.”
Policies will be fine-tuned as needed and the nation will press on with economic reforms, the statement said. The global outlook “remains very grim” with China facing pressure for growth to slow and prices to rise, operational difficulties at some companies, and “a grim situation in energy saving,” the statement from Xinhua said.
In December last year, the government officially shifted its monetary policy stance to “prudent” from “moderately loose.” The party’s 25-member Politburo said last week that that label will remain unchanged for 2012 and fiscal policy will remain “proactive.”
The government’s labels for policy can lag behind changes in implementation.
China will speed construction of “ordinary commercial residential housing” and seek to return home prices to a reasonable level, today’s statement said. The yuan’s exchange rate will be kept “basically stable,” it said.
Housing transactions declined in 27 out of 35 cities during the week of Dec. 5-11, according to Soufun Holdings Ltd., the operator of the nation’s biggest real-estate website
“The risk of a more substantive slowdown in China’s economic growth than anticipated so far is rising,” Andrew Polk, an economist at The Conference Board, said. “Targeted loosening of credit markets” should give some help to companies “but the pass through from previous policy tightening measures will continue to act as a brake on the economy,” he said.
China’s economy will grow 8.5 percent next year, the least in 11 years and down from 10.4 percent in 2010, according to the Organization for Economic Cooperation and Development.
“China’s government can and should reflate the economy to support growth and jobs in the coming year,” Qu Hongbin, a Hong Kong-based economist at HSBC Holdings Plc, said before today’s statement. Qu sees tax cuts, fiscal spending, additional reserve-ratio cuts and a loosening of quotas that limit bank lending.
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