The State Council, China's cabinet, will hammer out
stringent measures to cool over-heated investment on real estate,
automobile and steel sectors, said Cong Ming, vice-director-general
of the Macro Economy Department under the State Council Research
Office, at a seminar in Jinan
University.
According to Cong, the State Council will hammer out relevant
measures to increase investment on public facility constructions
while structurally adjusting capital-flow towards real estate,
automobile and steel sectors. Investment projects of high-class
residential and office buildings will be carefully reviewed and
leveraged. Moreover, the State Council will strengthen works on tax
rebate in exporting business and increase refunding indexes. By the
end of last year, the government had owed 240 billion yuan
(US$28.99 billion) tax rebate fund that should be returned to
enterprises.
Now the central government is studying the feasibility to let
local financial departments share the burden of tax refunding.
Cong Ming, who participated in the State Council's economic
policy-making, thinks that the real estate, automobile and steel
sectors have seen some structural investment problems and shown
signals of potential bubbles. He warns that some messing-up may
even lead to financial risks. According to statistics, the national
average investment rate between January and May reached 39.4
percent while residents' consumption remained stable. In the SARS
period, residents' consumption even decreased by a big margin.
The real estate sector now enjoys the highest investment growth,
as the business regards it an investment bonanza with continuous
price hike and substantial profit. But while high-class resident
houses and office buildings flooding the market with slowing down
sales, economic houses and those best needed by common residents
fall short of demand. Meanwhile, the over-numbered new automobile
projects mushrooming nationwide will cause redundant construction
instead of scale-up operation. In steel production, there is a lack
of high value, high quality and high technological products, while
the numerous small steel factories, who produce low-quality steel
and enjoy high profit return, further exert the nation's stringent
resources of water, power and transportation.
(China.org.cn by Alex Xu, July 24, 2003)