China's top executive body has ordered that no approvals for new steel, aluminum and cement projects be made this year in a bid to halt "haphazard" and "redundant" investments, state media said yesterday.
In its latest attempt to cool the economy, the State Council issued a circular that also called for a nationwide examination of nearly all ongoing investment projects including commercial offices, golf courses and shopping malls.
Xinhua news agency said the council, China's Cabinet, in addition wants the process of converting farmland for use in infrastructure projects to end "to curb the investment craze in some industries and to ensure the smooth operation of the national economy."
The orders are the latest in a string of administrative measures by central authorities to try to calm soaring investment by local government that is contributing to over-heating and over-investment in some sectors.
The efforts to curb economic growth, which Premier Wen Jiabao (溫家寶) said this week would be "forceful," have rattled neighboring countries that depend on China's booming economy, which grew 9.7 percent in the first quarter.
Financial markets across Asia have slumped, while sentiment has been dampened globally.
The government has been trying to cool investment for the past eight months through a variety of measures, including curbing bank lending and issuing administrative orders for clamp downs on inefficient and duplicated projects.
Most recently, the government reportedly ordered commercial banks to stop new lending activities ahead of the May 1 Labor Day holidays, a move interpreted by the markets as preparation for an interest rate hike.
Hong Kong's South China Morning Post, citing unidentified bankers, reported yesterday that China's central bank plans to raise lending rates by half a percentage point at the end of next week. The bank is also considering raising deposit rates by a quarter of a percentage point and held an emergency meeting yesterday to discuss measures to curb investment and slow economic growth, the report said.
China's central bank declined to confirm or deny the report.
Goldman Sachs Group Inc predicts rates will rise by as much as a percentage point within the next 12 months and Credit Suisse First Boston is forecasting increases totaling two percentage points by the end of 2005. Deutsche Bank and Standard Chartered Bank estimate rates will be raised by half a point this year.
"The government is likely to raise interest rates during the holiday," said Steven Xu, a Hong Kong-based economist at ICBC (Asia) Ltd.
He declined to say how big a move he expects.
China's benchmark one-year lending rate is 5.31 percent and was last raised in 1995, when it was increased by more than a percentage point to 12.06 percent. Inflation at that time was more than triple the current rate. The one-year deposit rate is 1.98 percent and was last raised in 1993, when it reached 10.98 percent.
Morgan Stanley's chief Asia economist Andy Xie (謝國忠) said that even a draconian clampdown on investment would probably not be enough to avoid a hard landing, but welcomed the government intervention.
"The overshooting of China's investment cycle has become so big that it threatens the country's stability. If China's leadership were not to take resolute actions, the national economy would spin out of control," he said.
"This is certainly the right moment to show who are in charge of the country."
The Legislative Yuan’s Finance Committee yesterday approved proposed amendments to the Amusement Tax Act (娛樂稅法) that would abolish taxes on films, cultural activities and competitive sporting events, retaining the fee only for dance halls and golf courses. The proposed changes would set the maximum tax rate for dance halls and golf courses at 50 and 20 percent respectively, with local governments authorized to suspend the levies. Article 2 of the act says that “amusement tax shall be levied on tickets sold or fees charged by amusement places, facilities or activities” in six categories: “Cinema; professional singing, story-telling, dancing, circus, magic show, acrobatics
Tainan, Taipei and New Taipei City recorded the highest fines nationwide for illegal accommodations in the first quarter of this year, with fines issued in the three cities each exceeding NT$7 million (US$220,639), Tourism Administration data showed. Among them, Taipei had the highest number of illegal short-term rental units, with 410. There were 3,280 legally registered hotels nationwide in the first quarter, down by 14 properties, or 0.43 percent, from a year earlier, likely indicating operators exiting the market, the agency said. However, the number of unregistered properties rose to 1,174, including 314 illegal hotels and 860 illegal short-term rental
INFLATION UP? The IMF said CPI would increase to 1.5 percent this year, while the DGBAS projected it would rise to 1.68 percent, with GDP per capita of US$44,181 The IMF projected Taiwan’s real GDP would grow 5.2 percent this year, up from its 2.1 percent outlook in January, despite fears of global economic disruptions sparked by the US-Iran conflict. Taiwan’s consumer price index (CPI) is projected to increase to 1.5 percent, while unemployment would be 3.4 percent, roughly in line with estimates for Asia as a whole, the international body wrote in its Global Economic Outlook Report published in the US on Monday. The figures are comparatively better than the IMF outlook for the rest of the world, which pegged real GDP growth at 3.1 percent, down from 3.3 percent
ECONOMIC COERCION: Such actions are often inconsistently applied, sometimes resumed, and sometimes just halted, the Presidential Office spokeswoman said The government backs healthy and orderly cross-strait exchanges, but such arrangements should not be made with political conditions attached and never be used as leverage for political maneuvering or partisan agendas, Presidential Office spokeswoman Karen Kuo (郭雅慧) said yesterday. Kuo made the remarks after China earlier in the day announced 10 new “incentive measures” for Taiwan, following a landmark meeting between Chinese President Xi Jinping (習近平) and Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) in Beijing on Friday. The measures, unveiled by China’s Xinhua news agency, include plans to resume individual travel by residents of Shanghai and China’s Fujian
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