Chinese premier promises to cool down property prices

Chinese premier promises to cool down property prices
Dec 28, 2009 - PropertyGuru.com.sg

Chinese Premier Wen Jiabao said the Chinese government will cool down property prices, rest pressure for the yuan and keep inflation rates 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 in an interview yesterday, adding that China will “absolutely not yield” to calls for currency gains.

China’s property prices surged in November at the quickest pace since July 2008, adding concerns that inflows of money and lending records will trigger asset bubbles in the fastest-growing major economy in the world. Central bank adviser Fan Gang said China needs to be on alert for real-estate, commodity and stock bubbles as global capital flows into the emerging economies.

“It’s difficult to see how serious the government is about cooling the property market,” said former Morgan Stanley chief Asian economist, Andy Xie. “The issue isn’t about introducing new measures but enforcing existing measures.”

In November, property prices in over 70 major cities increased 5.7 percent from the previous year, compared with 3.9 percent in October. Wen emphasized plans to develop more low-cost housing and said the Chinese government would crack down on illegal activities like land hoarding that fuelled price increases.

Consumer prices increased 0.6 percent in November from the previous year, snapping a nine-month run of deflation.

The government will ensure a “moderately loose” monetary policy, as well as a “proactive” fiscal stance, said Wen, adding that withdrawing stimulus packages too quickly would be a big mistake.

About 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of 2008 gave way to China’s recovery after the economic crisis cut down export demand. This also added the risk of bad loans. Wen said that it would be good if lending were not on a large scale.

The Premier noted the government’s move on the yuan after rejecting the call for a stronger currency by visiting European officials, including Jean-Claude Trichet, president of the European Central Bank. China held the yuan for about 6.83 per dollar since July 2007, shielding its exporters from the decline of global demand.

“Maintaining a stable yuan has made an important contribution globally,” Wen said. “We will absolutely not yield to pressure to appreciate.”