Chinese Premier Wen Jiabao (溫家寶) said the government would cool property prices, resist pressure for the yuan to appreciate and keep inflation at “reasonable” levels.
“Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize” them, Wen said on Sunday in an online interview with Xinhua news agency.
China will “absolutely not yield” to calls for currency gains, he said.
China’s property prices climbed last month at the quickest pace since July last year, adding to concern that record lending and inflows of money would inflate asset bubbles in the world’s fastest-growing major economy.
Central bank adviser Fan Gang (樊綱) said on Nov. 18 that the nation needed to be on alert for stock, real estate and commodity bubbles as global capital flows into emerging economies.
“It’s difficult to see how serious the government is about cooling the property market,” said Andy Xie (謝國忠), former Morgan Stanley chief Asian economist. “The issue isn’t about introducing new measures, but enforcing existing measures.”
The Shanghai Property Index of 33 stocks gained 1 percent as of 12:34pm yesterday. The gauge has doubled this year.
Last month, real estate prices in 70 major cities rose 5.7 percent from a year earlier, compared with 3.9 percent in October.
Wen reiterated plans to build more low-cost housing and said the government would crack down on illegal activities, such as land hoarding, that drive up prices.
China should anticipate inflation because of factors including rising global commodity costs, Wen said, pledging to keep price increases in a “reasonable range.”
Consumer prices climbed 0.6 percent last month from a year earlier, snapping a nine-month run of deflation.
The government will maintain a “moderately loose” monetary policy and a “proactive” fiscal stance, Wen said, adding that it would be a mistake to withdraw stimulus measures too quickly.
“China will keep its loose stance at least in the first half of next year as inflation is expected to stay within tolerable levels,” said Shen Minggao (沈明高), chief economist for Greater China at Citigroup Inc. “There won’t be significant changes to maintain policy stability, but some industries with excess capacity have seen credit tightened.”
On Friday, China raised its growth estimate for last year to 9.6 percent from 9 percent and said this year’s quarterly figures would also increase, narrowing the gap with Japan, the world’s second-largest economy.
A record 9.2 trillion yuan (US$1.3 trillion) of loans in the first 11 months of this year drove China’s recovery after the global crisis slashed export demand. It also added to the risk of bad loans.
The premier said on Sunday that it would be better if lending weren’t on such a large scale.
Wen reiterated the government’s stance on the yuan after last month rejecting a call by visiting European officials, including European Central Bank president Jean-Claude Trichet, for a stronger currency. China has held the yuan at about 6.83 per US dollar since July last year, shielding its exporters from the slump in global demand.
“Maintaining a stable yuan has made an important contribution globally,” Wen said in the Xinhua interview. “We will absolutely not yield to pressure to appreciate.”
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