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Chinese shares close at record high（2007/04/25）
Chinese shares rose to a new high on Tuesday, with the benchmark Shanghai Composite Index rising 0.26 percent to close at 3,720.53 points.
The index, which covers both yuan-denominated A-shares and foreign currency-denominated B-shares listed on the Shanghai StockExchange, opened at 3,736.15 points and touched an intraday all-time high of 3,746.24 points in the morning.
The component index of the smaller Shenzhen Stock Exchange was down 0.15 percent to 10,669.04 points.
Combined turnover of the two bourses soared to a record of 317.6 billion yuan (40.72 billion U.S. dollars).
　

Report predicts China's GDP grow rate to reach 10.9% in 2007（2007/04/24）
A Blue Paper issued by the Chinese Academy of Social Sciences (CASS) here on Friday predicted China's growth rate of gross domestic product (GDP) will reach 10.9 percent in 2007.
The figure is slightly higher than last year's GDP growth rate of 10.7 percent and much higher than the targeted annual rate of 7.5 percent set for China's 11th five year plan period (2006-2010).
The paper, which is about prediction on China's economic prospects in 2007, predicted that the growth rate of added value for primary, secondary and tertiary sectors will be around 5 percent, 12.9 percent and 10.1 percent respectively this year.
China's GDP totaled 5.03 trillion yuan (653 billion U.S. dollars) in the first quarter of this year, up 11.1 percent over the same period last year, according to latest figures provided by the National Bureau of Statistics.
The growth rate was 0.7 percentage points higher than the year-earlier level and 0.4 percentage points higher than the level for the whole of last year.
　

Foreign banks go local today(2007/04/23)
Four foreign banks will provide retail yuan services to people across China from today.
HSBC, Citigroup, Standard Chartered Bank and the Bank of East Asia passed the regulator's audit last Thursday and now have unlimited access to the country's $2-trillion domestic household savings.
The banks, however, have said they mainly intend to promote wealth management services and target China's wealthier customers.
Domestic lenders, trying to fend off competition in the retail market, are also stepping up their efforts to court higher-end customers with services such as private banking.
The regulator said Chinese institutions should provide personalized products and services, and added that the banking sector in Shanghai is benefiting from a great climate of innovation and development, attributed partly to anticipated competition from the foreign banks.
The four overseas institutions have more than 100 outlets across China. They said over the weekend that their Shanghai branches would offer full yuan services from today while others are expected to do so shortly.
"It's an important milestone in our bank's development and a significant beginning for us to provide full banking service to large numbers of domestic residents," said Yu Xueqiang, head of Bank of East Asia's China business.
In addition to wealth management, the four banks can now provide a wide range of services, including mortgage loans.
They could also expand their funding sources for corporate banking business by gaining access to personal savings and inter-bank borrowing.
The four banks, however, have fewer branches than their established domestic rivals. As such, they plan to highlight their wealth management services and target high-end customers by requiring high minimums.
Standard Chartered said it would roll out various renminbi products for customers under two retail brands - Priority Banking and Excel Banking.
HSBC will concentrate on its Premier Wealth Management service for its retail banking business and charge 300 yuan a month to handle accounts with less than 500,000 yuan.
Last week, Citigroup became the first foreign bank in China to offer a yuan-denominated investment linked insurance product.
The bank, the largest in the US, is providing the service with the United MetLife Insurance Company.
Domestic banks are foraying into the super high-end sector.
Bank of China, the nation's second largest lender, launched a private banking service for millionaires in Beijing and Shanghai last month.
China Banking Regulatory Commission's Shanghai bureau said some domestic institutions need to move faster to enhance their services.

Yuan hits new high against U.S. dollar(2007/04/20)
China's currency, the yuan, hit a new high on Thursday, breaking the 7.72 mark for the first time, according to the Chinese Foreign Exchange Trading System.
The central parity rate of the yuan, also known as Renminbi (RMB), stood at 7.7199 yuan to one U.S. dollar on Thursday, gaining 39 basis points from Wednesday's reference rate of 7.7238 to the dollar.
This is the fifth time in April, or the 24th time since the beginning of the year, that the yuan has set a new record, climbing 888 basis points, from 7.8087 yuan to one U.S. dollar posted on the last trading day of 2006.
The accumulative appreciation has exceeded five percent.
But the yuan lost 94 basis points from the previous trading day to reach a central parity rate of 10.5010 yuan against one euro. And it moved down 209 basis points to reach 6.5257 yuan against 100 Japanese yen on Thursday.
　

Will the central bank raise interest rates again?(2007/04/19)
The People's Bank of China, the country's central bank, decided on March 18 to increase the benchmark interest rate for deposits and loans with financial institutions by 0.27 percentage points. This adjustment brought the one-year loan rate and one-year deposit rate to 6.39% and 2.79%. This is the first time the central bank has adjusted the benchmark interest rate after raising the deposit reserve rate successively in 2007. To discuss these changes, People's Daily spoke to Ba Shusong, the deputy director of the Financial Center of China State Council's Development Research Center; Ha Jiming, chief economist of the International Finance Corporation; and Tang Min, the chief economist at the Asian Development Bank Resident Mission in China.
Interest rate increase expected
Q: Why did the central bank raise the interest rate?
Ba Shusong: Over a period of time, the central bank has adopted a single monetary policy, which has had a certain negative impact on the Chinese financial markets.
For example, the central bank has issued too many bonds. This has influenced the bond market, as well as impacted on the rate of return of commercial banks. In an effort to relieve the negative impact, the central bank also increased the reserve ratio. But neither has had a notable effect. Therefore, the central bank decided to increase the interest rate.
Ha Jiming: We fully expected this raise. Firstly, according to macroeconomic data, the rate of inflation exceeds the deposit rates, turning out to be negative; secondly, data indicates that monetary and credit growth have continued to accelerate, providing capital support to an investment rebound. In addition, the excessive growth of the credit and inflation rate has led to the rise of negative interest rates, which is not conducive to the consolidation of macro-controls and the development of the capital market. Therefore the interest rate increase will help consolidate the achievements of macroeconomic controls.
Min Tang: I think there are three reasons for this interest rate increase. Firstly, China's liquidity remains high; secondly, the consumer price index (CPI) is still high, which may cause inflation; thirdly, rate increases will play a role in slowing down the fast growth of the capital market, especially the soaring real estate prices.
Interest rate increase has little impact on China's economic development
Q: How will raising the interest rate impact on China's economy?
Ba Shusong: This interest rate increase will not have much of an effect on China's economy because people have talked about it for some time and its effect on the capital market has been partly digested in advance. After all, there are not so many people who raise money from financing. The main effect of the interest rate increase will be reflected in reduced investment in infrastructure, because the increase in interest rates will lead to the higher cost of funds and contain investment desire and expectation.
Ha Jiming: In the short term, there will be a certain degree of volatility in stock market prices. However, it is not necessarily due to interest rate increases. Psychological changes in investors will be the major reason. The current economic foundation is fairly good. We do not expect a significant wave due to a single policy adjustment. However, the impact of interest rates changes on enterprises will be quite obvious. Increases in financing costs will encourage enterprises to turn to other channels to raise money, such as the bond market, the stock market, et cetera. This will increase the proportion of direct financing and promote the development of financial markets. Generally speaking, this interest rate hike will have a limited impact on the real economy. It is expected that by increasing interest rates, China may slow its excess economic growth and prevent its economy from overheating. Since the rate of increment for interest rates is still lower than that of the inflation rate, the actual interest rate level is still low. China's real economic rate of return on investment remains high.
Tang Min: The small adjustment will have little impact on China's economy other than the psychological effect. Its influence on consumers will be weak. Savers will benefit more. Actually, the central bank has made several adjustments to send a clear signal to the market: it does not want an overheated economy.
There is little room for an interest rate increase
Q: Will the central bank continue raising the interest rates in 2007?
Ba Shusong: The interest rate increase demonstrates the diversity of the central bank's monetary policy tools. Now it has little room to continue raising the interest rates. From the perspective of the global environment, the United States might enter a period of interest rate cuts. From the perspective of the domestic market, China's central bank has to take into consideration four major factors: the consumer price index (CPI), producer price index (PPI), GDP deflator and the situation of commercial banks' business operation. At present, the CPI is increasing fast, but growth of PPI is more moderate. The rapid growth of credit in the first two months, to a very large extent, resulted from commercial banks' tradition of "early lending, early gains", and is expected to gradually slow.
Ha Jiming: The central bank might raise the interest rate one or two more times this year, once in the first half and once in the second half. It may also raise the statutory deposit reserve ratio two or three times this year. In addition, the State Administration of Foreign Exchange Company will set up a company specialized in foreign exchange administration, which will also help lower liquidity. Apart from the combination of monetary policy tools, there are other combinations of different policies, such as fiscal policies, that can better help solve the problem.
Tang Min: An increase of 0.27 percentage points in the one-year benchmark deposit rate is only a slight adjustment. The central bank is sending a signal. But this does not mean it will stop regulation and policy adjustment. No-one can rule out the possibility of the central bank raising the interest rate in the near future. If excess inflation and liquidity cannot be restrained in the next few months, the central bank is likely to raise interest rates again.
　

Property shares drive up China's stock markets on Tuesday（2007/04/18）
Property company shares drove Chinese stock markets to a new high Tuesday, buoyed by reports of rising housing prices in the nation's cities.
The benchmark Shanghai Composite Index surged past the 3,600 point mark for the first time to reach 3,611.87 points, up 0.43 percent from the previous close. Turnover reached 177.82 billion yuan (23 billion U.S. dollars).
The Component Index of the Shenzhen Stock Exchange rose 39.9 points, or 0.39 percent, to conclude the trading day at a record 10,289.1 points on turnover of 101.4 billion yuan (12.7 billion U.S. dollars).
Property shares performed well, with China Vanke gaining 3.1 percent to 19.46 yuan, Gemdale rising by the daily 10 percent limit to 19.93 yuan and Silvertie Holding Co. closing at 8.2 yuan after also increasing by the 10 percent daily limit.
Housing prices in China would keep rising steadily as the demand was still on the rise, so the real estate sector was promising in the mid and long term, said analysts.
The average prices of new homes in 70 Chinese cities rose 6 percent in the first three months over the same period last year and 0.1 percentage point higher than the February level, according to figures from the National Development and Reform Commission released on Tuesday.
Shares in the chemical fiber, textiles, steel, coal and power supply sectors were also in favor.
Mengdian Huaneng Thermal Power rose to the 10-percent daily limit to close at 7.54 yuan. Black Peony Co., a textile and clothing company, also rose to the limit to finish at 8.64 yuan.
Shanghai stock exchange recorded 637 gainers and 202 losers with 53 shares unchanged, while the Shenzhen bourse saw 433 gainers and 150 losers with 73 shares unchanged.

China's tax revenue up 25.5% in Q1（2007/04/17）
China's tax revenue reached 1.13 trillion yuan (146.8 billion U.S. dollars) in the first quarter of2007, posting an increment of 229.6 billion yuan over the same period last year, or up 25.5 percent year on year, a record growth rate in years, said the State Administration of Taxation on Friday.

Stocks break 3,500 points(2007/04/13)
The benchmark Composite Index on the Shanghai Stock Exchange increased to 3,512.09 points at 11:30 a.m. on Thursday, up 0.48 percent from the previous close.
The Component Index on the Shenzhen Stock Exchange increased to 9,852.93 points at 11:30 a.m. on Thursday, up 1.02 percent from the previous close.

　

China's monthly trade surplus plummets to $6.9 bln in March（2007/04/12）
China's trade surplus plunged to 6.87 billion U.S. dollars in March, which was less than a third of what it was in February, figures released by the General Administration of Customs showed on Tuesday.
The growth rate of exports in March compared to the same period last year was 6.9 percent, a five-year low.
"We don't need to be panic over the sharp decline since China is stepping up efforts to reduce trade surplus," said Zhang Yansheng, an economist with the National Development and Reform Commission.
"However, we do need to watch closely the long-term effects of the policies," he said.
Meanwhile, some economists believe the sharp rise in February and deep slump in March were caused by exporters delivering March orders in February in order to avoid losing out on export tax rebates.
China has cut export tax rebates on some basic metals and textiles to discourage firms from selling overseas.
China's exports in March grew 6.9 percent to 83.4 billion dollars while imports grew by 14.5 percent year on year to reach 76.6 billion dollars.
The country's trade volume in March reached 160 billion dollars, up 10.4 percent from a year earlier, according to the administration.
China's first-quarter trade volume came to 457.74 billion dollars, up 23.3 percent year on year. Exports reached 252.09 billion dollars, up 27.8 percent year on year, while imports amounted to 205.65 billion dollars, up 18.2 percent year on year.
China's trade volume with the Europe Union, its largest trade partner, reached 75.39 billion dollars in the first quarter, up 30.3 percent year on year. Total trade with the U.S. hit 66.72 billion dollars, up 20.1 percent year on year. Trade volume with Japan reached 52.91 billion dollars, up 15.2 percent year on year.

China's trade surplus likely to drop in March(2007/04/11)
China's trade surplus may see noticeable change in March after the surge in January and February, according to Vice-Minister of Commerce Gao Hucheng.
Gao made the comment at a news conference for the China International Garment and Textiles Fair.
The first two months of the year saw an unexpected increase in the trade surplus. The combined total of $39.7 billion was triple that of a year earlier.
"The surplus of roughly $40 billion in January and February is not indicative of the trend for the first quarter and the rest of the year," said Gao.
The trade surplus saw a sharp increase in the first two months because the Spring Festival holiday fell in February this year, said Gao.
Gao said there would be noticeable change in the data for March.
In terms of foreign trade policy, the government will continue building a system that helps balance imports and exports, according to Gao.
And he said the situation will see gradual improvement. "The effect of last year's policy will be seen this year."
Exports in the textiles sector have been stable, with an increase of 20 to 25 percent.
Exports of textiles and garments reached $144 billion in 2006, up 26.2 percent. Imports amounted to $18.1 billion, up 5.6 percent.
An earlier report said the government planned to cut rebates for garment exports, but Gao said the ministry had no immediate plans to reduce export tax rebates.
Vice-Minister of Commerce Wei Jianguo said yesterday that China would introduce more policies to boost hi-tech and machinery imports, especially from countries that had a large deficit with China.
"One of the main ways to trim the trade surplus is by increasing imports of advanced technology and key equipment," Wei said.
China's trade surplus reached $177.47 billion in 2006.


World stock exchanges go hunting in China(2007/04/10)
Only two days after Robert Greifeld, CEO of Nasdaq, announced in Beijing the introduction of a China equities index, Noreen Culhane, executive vice president of the NYSE, also arrived in the Chinese capital hunting for potential listings.
"Global stock exchanges are stepping up efforts to recruit Chinese companies," said Zuo Xiaolei, chief economist with Galaxy Securities.
"To survive and make profits," Zuo said, "stock exchanges have to list more companies."
Greifeld visited China late in 2005 soon after becoming Nasdaq president. Nine Chinese companies listed on Nasdaq in 2006 and six more have listed in the past three months.
"China is our fastest-growing market outside the United States. We are optimistic about the number of Chinese companies that can list on Nasdaq," said Xu Guangxun, Nasdaq's chief representative in China.
Eighty-one Chinese firms raised 20.5 billion U.S. dollars from overseas initial public offerings (IPO) in 2005.
In 2006, 86 Chinese firms raised 44 billion dollars from overseas IPOs and accounted for 19 percent of the 2006 world total.
These statistics explain why New York, Nasdaq, Toronto, London, Singapore, Tokyo and other giant stock exchanges are flocking into China.
"Chinese firms have become a new power in the world capital markets," said Yuan Gangming, a well-known economist with the Chinese Academy of Social Sciences.
"China must speed up the development of its domestic capital markets," he said.
Yuan's warning echoed a report released by the Research Center for China Securities Regulatory Commission (CSRC).
Too many high-grade Chinese enterprises listing overseas will slow the development of the domestic capital market and prevent Chinese people from benefiting from the companies' growth.
Meanwhile, listing overseas could be risky because it will expose companies to the risk of a takeover, the report said.
The CSRC is encouraging big state-owned enterprises to list domestically or in both overseas and domestic markets. It has called on Chinese companies that have listed overseas to come back and issue shares on the mainland.
China Mobile and Bank of Communication have filed "return" applications and PetroChina is also making preparations.
In 2006, as the Chinese stock market swung out of a four-year bearish ordeal, 65 companies listed, raising some 17.1 billion dollars.
"China's stock markets have done well recently," said a senior official with the Shanghai Stock Exchange, "although there are certain problems."
For instance, China has almost 20 million enterprises and about 10,000 of them qualify for listing. However, complicated and time-consuming red tape have kept most of them outside the stock market.
　

China, India to enhance co-op in financial industry（2007/04/06）
China and India will strengthen cooperation in the financial industry, said Wu Xiaoling, vice governor of the country's central bank on Wednesday.
Wu made the remarks at a Sino-Indian financial summit held in western India's Bombay.
The vice governor said China's financial industry will pay equal attention to competition and cooperation, aiming to find a win-win solution for both sides.
She said the country will give foreign financial institutions special treatment and boost competition between domestic and foreign companies.
Wu also encouraged Chinese financial institutions to sharpen their competitive edge in the international market by cooperating with foreign institutions.
The vice governor pointed out China's financial sector needs to improve its industrial structure, management capacity and risk control capability.
These tasks will be implemented partly through international communication and cooperation, said Wu.
China and India face similar challenges on the path of development and should enhance cooperation in the financial industry, she said.
Jayant Patil, Finance Minister of India's Maharashtra agreed with Wu, saying the GDP of the two countries accounted for 50 percent of the world's total in the nineteenth century but the proportion dropped to 1 percent in the twentieth century.
He also said the two sides should strengthen cooperation in the financial industry.
Statistics with the central bank show China and India have enjoyed fast growing economic and trade cooperation since the mid 1990's. Bilateral trade volume reached 25 billion US dollars in 2006. It is expected the two sides will register a trade volume of40 billion US dollars in 2008.
　

China will not follow U.S. energy consumption model(2007/04/05)
China will not follow the U.S. energy consumption model because energy resources are limited, said Xu Dingming, vice director of the Office of the National Energy Leading Group.
Xu made the remark at an MIT Energy Forum in Shanghai on Tuesday. He said if Chinese people consumed energy like their U.S. counterparts, China would need 4.5 billion tons of oil per year. However, the annual global oil supply is just four billion tons with only 1.6 billion tons in commercial circulation.
According to the National Bureau of Statistics, Chinese citizens owned nearly 30 million private cars at the end of last year.
With annual oil consumption of two tons per vehicle and a 20 percent growth in car numbers per year, the transportation sector could become a large energy consumer in the future, warned the official.
Xu pointed out that westerners account for only 15 percent of the world's population but used the lion's share of the world's energy to power their industrial processes.
China cannot follow the wasteful western model, said Xu, but would have to invent a cleaner, more effective energy consumption model of its own.
Reproducible energies are strongly recommended by experts and conservationists. China plans to raise the proportion of reproducible energies in its total energy consumption to 16 percent by 2020.

Report: China's fixed assets investment to rise 21% in 2007(2007/04/04)
China is expected to see hefty investment growth again this year even though urban fixed assets investments grew more slowly in the first two months of the year, according to a think tank report.
The Institute of Investment of the National Development and Reform Commission, China's top planner, predicted on Monday that the year's total investment would grow 21 percent, a dip of only three percentage points from last year.
The growth rate of urban fixed assets investment is expected to drop 1.5 percentage points, but still hover at a high level of 23 percent, it said.
Official figures showed that total fixed assets investment over the first two months surged 23.4 percent year-on-year to 653.5 billion yuan (about 86 billion U.S. dollars).
Investment in the real estate sector, however, surged 27 percent, a rise of 5.6 percentage points year-on-year.
"Sound investment growth hinges on the healthy growth of the real estate industry. It's too early to tell whether the investment hike in real estate is rebounding from the end of last year or gaining momentum for another big rise," noted the report.
Real estate investment grew 22 percent last year. This year the growth rate is estimated at 25 percent, while investment in manufacturing and transportation were expected to grow 27 percent and 29 percent respectively.
Apart from the real estate industry, the report noted, transportation, telecommunication equipment manufacturing and metallurgy would also be major driving forces for investment.
The world's fourth-largest economy, powered more by investment and exports than by domestic consumption, has maintained double-digit growth for four consecutive years.
"It is impossible to change the pattern in the short term," said the report.
To optimize its economic structure, China needs an annual gross domestic product (GDP) growth rate higher than nine percent, it noted.
The State Information Center under the State Council has raised its forecast for the GDP growth rate from 10.2 percent to around 11 percent in the first quarter.

China's GDP forecasts revised after strong start（2007/04/03）
Stronger-than-expected economic figures have prompted a number of international economic research institutions to revise upwards their forecasts for China's gross domestic product (GDP) growth.
Almost all the major economic indexes in the first two months of this year have exceeded those for the same period last year.
"The country's GDP growth in the first quarter will be faster than in the equivalent period last year and also that of the previous quarter," Chen Dongqi, deputy director of the Institute of Economic Research of the National Development and Reform Commission, said.
The State Information Center has adjusted its GDP growth forecast for the first quarter from 10.2 percent to about 11 percent.
Despite the government last year adopting a number of tightening measures, economic growth has shown clear signs of rebounding in the past quarter.
Statistics show that urban fixed-asset investment picked up moderately to 23.4 percent year-on-year in January-February, and from about 20 percent in the fourth quarter of last year, reversing the trend of a gradual slowdown since last July.
Meanwhile, the trade surplus registered a massive leap of 230 percent, and retail sales were up 14.7 percent on the first two months of last year.
"Industrial growth is a key driving force behind overall economic growth, and power generation is also a useful indicator," Chen said.
According to the National Bureau of Statistics, China's industrial output rose 18.5 percent year-on-year while industrial profits soared 43.8 percent in the first two months.
Growth in power generation also accelerated to 16.6 percent year-on-year from less than 14 percent in the same period last year.
Despite expectations the government will introduce another round of tightening measures soon, global investment bank, Lehman Brothers, still revised up its forecast for the Chinese economy.
According to a recent report by the firm, the first quarter growth forecast has been raised from 9.8 percent to 10.1 percent, and the annual growth rate from 9.6 percent to 9.8 percent.
"In the light of the stronger-than-expected figures in the first two months of this year and the likely policy responses, we have lifted our full-year growth projections for this year to 10 percent from 9.1 percent, based mainly on stronger growth in credit, investment and exports," Qu Hongbin, the chief China economist with HSBC, said.
Domestic banks extended new loans of 982 billion yuan (127 billion U.S. dollars) in the first two months of this year compared with 716 billion yuan (92 billion dollars) in the same period of 2006.
The government forecast early last month that the country's GDP is to grow by about 8 percent this year.
The country has just witnessed four consecutive years of double-digit growth, including 10.7 percent GDP growth last year, the fastest in a decade.
The latest official forecast reflects the authorities' determination to shift the focus of economic growth from quantity to quality.
　

Chinese yuan continues to rise（2007/04/02）
The Chinese yuan, or Renminbi (RMB), rose to 7.73 per U.S. dollar on Thursday, a new record high.
The RMB has appreciated by 4.91 percent since China introduced exchange rate reform on July 21, 2005, dropping the decades-old peg to the U.S. dollar and linking the yuan to a basket of currencies.
On the same day in July 2005, China raised the value of yuan by two percent to 8.11 per U.S. dollar, and allowed it to move 0.3 percent above or below the parity rate against the U.S. dollar.
On Thursday the RMB reached 10.29 against the euro, 6.62 per 100 Japanese yen, 0.99 per Hong Kong dollar, and 15.18 per pound sterling, according to the Shanghai-based China Exchange Trading Center.
The RMB has appreciated by 784 basic points so far this year.
Analysts believe that upward pressure on the RMB has grown as international markets anticipate a drastic U.S. interest rate cut in the light of a weakening U.S. dollar.
The anticipation was fueled when the U.S. Federal Reserve announced last week that the exchange rate of the U.S. dollar would remain unchanged.
　

Industrial Bank: China's consumer price index may exceed 2.9% in March（2007/03/30）
China's consumer price index (CPI) may rise 2.9 percent in March compared with the same month last year, according to the country's mid-sized lender Industrial Bank.
Lu Zhengwei, an official at the bank's Capital Operation Center, said steeper grain prices were continuing to fuel inflation.
Lu said that February's CPI of 2.7 percent was 0.3 percentage points lower than expected thanks to slower increases in housing prices and small cuts in travel and telephone costs.
The index, a major gauge of inflation, stood at around 1.5 percent for most of 2006 before picking up speed to reach 2.8 percent in December, the highest increase in 22 months, and 2.2 percent in January.
Analysts blamed grain price hikes for the inflation.
The People's Bank of China, or central bank, said earlier that the nation's grain prices rose 9.1 percent in December compared with the same month in 2005.
The grain price rose 6.9 percent year-on-year in January and 6.8 percent in February, according to the National Bureau of Statistics.
China wants to limit inflation to 3.0 percent in 2007, according to the government work report delivered by Premier Wen Jiabao earlier this month.
The central bank raised one-year benchmark interest rates by 0.27 percentage points as of March 18 amid concerns about inflationary trends.
The Ministry of Commerce earlier estimated the CPI was expected to climb 2.5 percent for the whole year of 2007 due to a range of factors including higher gasoline prices.

Shanghai index hit new high on record volume(2007/03/29)
China's main stock index took a rollercoaster ride Wednesday before closing at a record high on the strength of financial shares.
The benchmark Shanghai Composite Index ended up 1.09 percent to 3,173.02, an all-time closing high. It has hit new highs for six consecutive sessions, extending this year's gains to 18.60 percent.
The index soared to a record high of 3, 179.40 within one hour of trading before making a nosedive to 3,052.07. But it gradually recovered the loss, driven by financial shares.
Huaxia Bank was the biggest gainer among bank shares with an increase of 7.82 percent, to 11.31 yuan. The Industrial and Commercial Bank of China, the country's biggest lender, rose 2.71 percent to 5.3 while Bank of China went up 2.9 percent to 5.33 yuan and China Merchant Bank surged 4.5 percent to 17.2 yuan.
China Life, the country's top insurer, gained 2.66 percent to 35.14 yuan while its main rival, Ping An Insurance rose 1.46 percent to 46.58.
Two other closely monitored indexes experienced curves similar to that of Shanghai Composite Index. However, the Shenzhen Composite Index failed to regain all the lost ground by the close. It ended 0.68 percent lower to 835.74. The Shanghai and Shenzhen 300 Index of major companies rose 0.49 percent to 2,797.64.
Trading was extremely heavy, witnessing the creation of new records in volume in both bourses. In Shanghai, the turnover hit 151.12 billion yuan with 16.73 billion shares changing hands. In Shenzhen, 986 million shares were traded at a turnover of 70.09 billion yuan.
Declining shares far outnumbered the advancing ones by a ratio of 3 to 1 in the Shanghai Stock Exchange and by 4 to 1 in the Shenzhen bourse.
The intraday plummet was partly attributed to the investors' lingering memory of a major fall at the end of last month. On February 27, the Shanghai Composite Index nosedived nearly nine percent after reaching a then record high in the previous session, triggering a global sell-off.

ADB: China's economy growth to moderate but stay high（2007/03/28）
China's economy growth in the coming two years will moderate but still remain high, Asian Development Bank (ADB) says in a major report released here Tuesday.
ADB's flagship annual publication "Asian Development Outlook 2007" predicted a 10.0 percent growth as to China's economy in 2007, and a 9.8 percent expansion in 2008. China achieved a 10.7 percent increase in gross domestic product (GDP) last year.
"A gradual tightening in monetary policy and the use of administrative tools moderated investment growth in the second half of 2006," said Ifzal Ali, ADB's Chief Economist, "In 2007 and 2008, softer external demand and policy curbs are expected to pull growth down gradually."
The report said that over the medium term (2007-2011), China's growth in GDP is expected to average about 9 percent. Inflation during this period will be higher than now, but probably lower than 3 percent on average.
In the medium and long-term, the aim for China is to achieve a more balanced and inclusive economy, less dependent on exports, investment and industry, and more on private consumption and services, it said.
Under measures to curb energy use and pollution, and property speculation, investment growth in China is likely to be at 20 percent in 2007, down from 24 percent in 2006.
"The government is actively pursuing to cool down the property market," Ali said when asked about China's real estate market. "Toa certain extent, the market has shown signs of cooling down since later half of 2006." He noted that the market tendency will dependon policies on foreign reserves, interest rates and foreign exchange rates.
According to the outlook report, industrial growth in China is projected to slow to 11 percent in 2007 and 10.8 percent in 2008. Agriculture is expected to benefit from a new official emphasis on rural development under China's 11th Five-Year Plan. Agricultural production is projected to increase by 5.2 percent to 5.4 percent in the next two years.
Services in China are expected to grow by 10.4 percent to 10.5 percent in the next two years, against a 10.3 percent growth in 2006, supported by the Chinese government's efforts to promote consumption as well as expenditures related with hosting the 2008 Olympics.
The outlook report analyzes the recent economic performance of over 40 developing member countries and provides forecasts for key macroeconomic indicators the next two years. It predicts a 7.6 percent and 7.7 percent for the region on average in 2007 and 2008 respectively.
ADB, established in 1966, is a multilateral development bank based in Manila. It is dedicated to reducing poverty in the Asia and Pacific region and consists of 67 members, 48 of which are from the region. China joined the ADB in 1986.

Analysts see stock wobbles（2007/03/27）
Shanghai stocks may move back and forth this week as investors are set to become cautious after regulators stepped up efforts to clamp down on stock market manipulation.
Analysts said large-cap firms may again lead the next round of tally on the upcoming launch of stock-index futures, which will track the country's broadest blue-chip index.
The Shanghai Composite Index, which covers yuan-denominated A shares and hard-currency B chips, closed 0.10 percent up at 3,074.29 on Friday, an all-time high.
The barometer sailed in all the five sessions last week and chalked up a combined climb of 4.9 percent.
Industry sources said Chinese regulators had been revving up pace to battle against stock-related crimes after a booming market spurred capital inflows.
The China Securities Regulatory Commission has started a probe into Hangxiao Steel Structure Co over possible insider trading after its shares surged sharply prior to a huge deal announcement.
An investigation may also be conducted into senior officials at GF Securities Co who are suspected to have been involved in insider trading before the broker unveiled a bid to take over a Shenzhen-listed firm.
"Some low-valued stocks have posted irrational gains recently, which sparked regulatory concerns over stock-price rigging and little awareness of risks," said Zhou Lin, a Huatai Securities Co analyst.
"Investors should be cautious against firms with sudden rises and the market may start to fluctuate."
China is set to launch its first equity-index futures contracts late in the second quarter based on a gauge that tracks the biggest 300 companies listed in Shanghai and Shenzhen.
Market watchers noted as the date draws near that fund managers may build up heavy positions on the underlying blue chips with an aim to trade the futures contracts as soon as the business starts.
"A short-term correction is needed to digest the recent rally," said Zhao Yuanhui, a Donghai Securities Co analyst.
"But I believe the market will likely continue to head north on the back of performances in heavyweight counters and quality chips."
The index may move in a range between 3,015 and 3,150 this week, Beijing Shoufang Investment Consulting Co said. The consultancy expects better performances in technology and telecommunications firms.
　

Green GDP shown the red signal (2007/03/26)
Green GDP accounting - which takes into account the impact of environmental degradation on the economy - has hit a snag, a source with the environmental watchdog said.
The National Bureau of Statistics (NBS) has asked the State Environmental Protection Administration (SEPA) not to release the latest results of Green GDP to the public and keep them only as a reference for policymakers, said the source.
The NBS and SEPA jointly released the Green GDP accounting for 2004 last September amid much fanfare; and the results for 2005 were planned to be released this month by SEPA.
"Experience has shown that both the theory and the methodology of Green GDP accounting are not sophisticated enough," the NBS said in the letter obtained by China Daily. "There are lots of difficulties in the pilot project."
The NBS said that the results would be sent to the State Council, the Cabinet, which would decide whether to publicize them.
The SEPA and NBS jointly launched the project in March 2004 to drive home to the public and officials the waste created and environmental damage wrought in the process of economic growth.
Simply put, Green GDP is calculated by deducting the cost of natural resources' depletion and environmental degradation from traditional GDP.
The country's first Green GDP report showed pollution caused losses of 511.8 billion yuan (64 billion U.S. dollars) in 2004, or 3.05 per cent of the 16 trillion yuan (2 trillion dollars) GDP that year.
At the news conference marking the release of the report, Pan Yue, vice-minister of SEPA, said the figures marked "only the beginning of our efforts in calculating Green GDP".
But soon after the report was released, some of the 10 provinces and municipalities in the pilot project were reluctant to continue their participation and wanted to pull out because of concerns that regional economic growth could be hit.
"It is good news if the suspension of the release of figures could improve the system of Green GDP accounting, as well as its implementation," said Zheng Yisheng, professor at the Center for Environment and Development affiliated to the Chinese Academy of Social Sciences. "But it is a pity if it means an end to Green GDP accounting."
　

China shares gain 0.45 percent, hit new high（2007/03/23）
China share prices hit new high on Thursday as the benchmark Shanghai Composite Index added 0.45 percent, or 13.85 points higher, to finish at 3,071.23 points.
The Shanghai Index, which covers both A- and B-shares, opened at 3,080.60 points and even reached the day's highest of 3,099.82 points with a turnover of 113.9 billion yuan.
The smaller Shenzhen Component Index ended up 0.41 percent, or 34.53 points higher, at 8,434.83 points with a turnover of 60.5 billion yuan.

Housing demand still strong(2007/03/21)
While domestic house buyers are expected to take a wait-and-see attitude after the recent rise in central bank interest rates, industry experts foresee little change in house prices.
Starting Sunday, the one-year loan rate and the one-year deposit rate have been both increased by 0.27 basis points to 6.39 percent and 2.79 percent, the People's Bank of China said on Saturday.
At the same time, the public housing fund (PHF) mortgage rates for individual house buyers were raised by 0.18 basis points. According to the Website of the Ministry of Construction, the annual interest rate for PHF loans with a maturity of five years or less has risen to 4.32 percent. PHF mortgage loans with a maturity of more than five years has been set at an annual interest rate of 4.77 percent.
"Obviously, house buying costs have risen and that could help curb domestic demand for new apartments in some degree," Zhai Baohui, an official with the policy research center at the Ministry of Construction, told the property channel on Sina.com.
"However, it will take time to get a clear picture about its exact impact on the country's real estate market."
Zhai said the situation could vary for individual home buyers.
"For capital affluent high-end apartment buyers, influence could almost be neglected as the 0.27 basis points' rate increase was rather small," Zhai said. "At the same time, demand by common wage earners, which account for the majority of the country's apartment buyers, will likely decrease as some of them might choose to postpone their apartment purchase due to the cost increase."
Industry analysts see the recent rate increase as just another move aimed at curbing the country's over-heated property market, which has seen prices almost triple since 1998. That's when China started nationwide urban housing reform.
Cong Cheng, an official with the local public housing fund management center, shared some of Zhai's views and said he believed the recent interest rate increase would have more of a psychological impact on people's buying sentiment.
"Increases in both the benchmark loan rates and PHF mortgage rates will have polarized effects over potential apartment buyers," Cong said during a phone interview yesterday. "People who can afford new apartments but are currently waiting are prone to feel pressured. Some of them, anticipating further increases by the central bank, might accelerate their pace to seal a deal.
"But for others, especially those who have a rather tight budget, it is also very likely that they might have to drop their plans."
Some industry experts emphasized that though the recent increase in interest rates were small, it could have had great impact on people's buying sentiment if the central bank continues to take such action in the near future. That's because for most home buyers, interest rates account for a significant part of the total cost of an apartment.
As for its possible influence over house prices, industry people said that very limited impact could be expected.
"Generally speaking, housing prices won't be affected much by this interest rate increase as we all know that the price is basically decided by the market demand," said an industry analyst with a local real estate agency, who declined to be identified.
Meanwhile, Pan Shiyi, president of SOHO China Ltd, one of the country's major developers, also expressed a similar opinion.
"Such an increase in interest rates will only have very small influence over housing prices," Pan was quoted as saying by Sina.com. "Not many potential apartment buyers will be deterred by such a small increase."
However, responses from local residents seemed rather mixed.
"My boyfriend and I have been looking for a new apartment over the past several months and probably won't change our mind even if the loan rates have been raised," said Vivian Yang, a 28-year-old marketing manager. "We plan to get married next year and just like many other young couples, we want to have a new apartment of our own to start our new life."
But Tony Yu, who graduated two years ago from a local university, said he thought current housing prices in Shanghai are still quite high.
"I hope the recent loan rate increase will have a positive effect on the overheated real estate market. If so, more people will be able to realize their dreams of having an apartment of their own."
　

Interest Rate Up to Check Lending Rise(2007/03/20)
The central bank yesterday raised the interest rate for the third time in less than a year to check surging loan growth.
The rise, announced on Saturday, led to 27-basis-point increase in both one-year deposit and lending rates. The benchmark one-year deposit rate now stands at 2.79 percent and the one-year lending rate at 6.39 percent.
The adjustment followed the release of figures last week that indicated surprisingly high credit growth during the first two months of the year.
Financial institutions issued loans worth 981.4 billion yuan (US$127 billion) during the two months, equal to 30 percent of all loans extended for the whole of last year, according to the People's Bank of China.
"The rate hike will help curb excessive credit growth and soaring property prices," said Ha Jiming, chief economist of China International Capital Corp.
China has been struggling with rapid investment growth and a sizzling real estate market since 2003. Annual fixed asset investment growth inched down from 26 percent in 2005 to 24 percent last year.
But the fast loan growth in the first two months triggered fears that funds are still being channeled to support new excessive investments.
Ha said the rate rise is justified also for rectifying the negative real interest rate, which has been lingering below zero since the consumer price index (CPI) growth jumped to 2.8 percent in December. The CPI, the key barometer of inflation, stood at 2.7 percent in February; and the one-year deposit rate before the rate hike was 2.52 percent.
Ha said the central bank may need to consider using other tools such as raising reserve requirements for commercial banks or central bank bills if further tightening is needed.
Ba Shusong, a researcher with the Chinese Academy of Social Sciences, agreed. He said the central bank has little room for further interest rate rises because the United States may be entering a rate-reduction period.
The renminbi's interest rate has been lower than the US dollar. Shrinking the difference between interest rates of the yuan and the greenback could prompt an influx of more hot money into China seeking profits from the renminbi.
　

Bilateral trade with Russia on fast track（2007/03/19）
Trade between China and Russia is expected to remain on a fast track in the coming years, but officials and experts also warned of bottlenecks.

"After eight years of fast growth, Sino-Russian trade has entered a period of correction," said Chinese Vice-Commerce Minister Yu Guangzhou, adding that a certain amount of fluctuation in the growth rate is normal.

Two-way trade between the countries has grown at a pace of over 30 percent every year from 1999 to 2005, jumping 15 percent in the last year, according to customs.

Yu said the neighboring countries should not only increase trade volume, but also "improve trade quality".

China is expected to enlarge its imports of machinery and electronic equipment from Russia, in a bid to restructure bilateral trade.

The Chinese government has made every effort to boost Russia's machinery and electronic exports to China, added Liu Guchang, the Chinese ambassador to Russia.

"China encourages domestic firms to buy products from Russia and helps Russian exporters showcase their products to Chinese firms," he said.

The two governments have also encouraged large companies from both sides to get involved in bilateral trade exchanges and to get their brands onto the markets.

Officials and researchers expected bilateral trade between the two countries would double last year's figure to hit 60 billion U.S. dollars to 80 billion dollarsin 2010, but they warned there were still bottlenecks in trade development.

"Disorderly trade has become the key barrier in Sino-Russian business," said Liu Huaqin, a researcher with the research institute under the commerce ministry.

Complicated clearance procedures in cross-boarder trade with Russia have seen many Chinese businesspeople consulting illegal "one-stop" clearance services.

The so-called grey clearance covers consumer goods such as textiles and footwear, machinery, and electronic products.

"If these products (that entered the Russian market without legal clearance) are not qualified, they will become a potential danger to consumers and will hurt the reputation of Chinese exporters as well," she said.

In addition, Yu predicted Russia's accession to the World Trade Organization would help strengthen its economic ties with China and Russia, as Russia is expected to complete negotiations for the accession this year.

He said Russia would further facilitate the economic and trade exchanges between the two countries after its entry to the WTO.

Increasing investment

Compared to the fast-growing trade figures, growth in bilateral investment has been slow in recent years.

According to statistics from the commerce ministry, China had invested a total of $1 billion in over 700 projects in Russia by the end of last year. Russia also invested $70 million in China. Those projects involved energy and resources exploitation, timber processing, home appliance making, telecommunications and building materials.

Liu with the research institute suggested Chinese enterprises try the processing trade in Russia.

Most Chinese exporters of machinery and electronics currently sell to Russia through local distributors.

"Our experience shows that bilateral investment ensures steady growth in the machinery and electronics trade," Liu said. "Products from joint ventures could either be sold in both countries or exported."

The Russian government expected Chinese businesses to invest in Russia to boost local manufacturing.

China also encourages investment in Russia. It expected China's accumulated investment in Russia to total $12 billion in 2020.

China will set up cooperation areas in Russia to help enterprises invest in the country.
(Source: China Daily)

Bumper FDI growth continues(2007/03/15)
The realized foreign direct investment (FDI) in China climbed over 13 percent in the first two months of this year.
The news comes amid concerns that the newly introduced unified corporate income tax rates might affect the FDI inflow.
China received some 9.7 billion U.S. dollars in FDI from January to February, up 13.04 percent from the previous year, the Ministry of Commerce said yesterday.
The continued rise in FDI marks the uptrend since the end of last year, after minor dips in the middle of 2006.
With a view to capitalise on the vast market of 1.3 billion people and low labor costs, "nearly every foreign investor wants a share of the China pie", said Hu Yanni, an analyst with China Securities Research of CITIC.
But she said the FDI growth rate is not expected to exceed 10 percent this year because of an already inflated base. FDI in China was 63 U.S. dollars billion in 2006.
Foreign companies will have to pay 25 percent corporate tax, up from the current 15 percent, according to the draft law on corporate income taxes, which is expected to be passed in this session of the National People's Congress and will come into effect from next year.
However, the government will continue to encourage foreign investment in the country's west.
China is also encouraging high value-added manufacturing sectors and services industries while halting approvals for foreign investments in high-pollution and low-efficiency ventures.
The ministry approved 5,716 foreign-invested enterprises in the past two months, up 11.29 percent from the previous year.
It did not disclose the amount of contracted investment the FDI agreements yet to be fulfilled, as opposed to the ones realized.
In the first two months of this year, Hong Kong invested 2.95 billion U.S. dollars to become the largest investor on the mainland. It was followed by the Virgin Islands and Japan. In this period, the US' actual FDI to China hit 448 million dollars, up 15.7 percent year-on-year.
　

Domestic demand rise key to soaring surplus(2007/03/14)
China will give priority to boosting domestic demand over increasing exchange-rate flexibility as it moves to resolve its massive trade surplus,central bank Governor Zhou Xiaochuan said Monday.

"The most effective way to reduce the imbalance is to use policies to adjust the economic structure," Zhou told a news conference in Beijing during the ongoing annual meeting of the National People's Congress.

"The first of these policies is to shore up domestic demand, especially to bolster domestic consumption and develop the services sector."

Other measures that could be employed to restructure the economy include spurring imports and encouraging Chinese enterprises to set up factories abroad, Zhou said.

"These measures might take a longer period to bear fruit, but they are very important and should be given priority consideration," Zhou said.

As a "complementary" measure, the exchange-rate policy can also play a role in helping to adjust the balance between imports and exports, Zhou acknowledged.

In addition, the country can alter the management of its foreign reserves to provide convenience to enterprises that want to invest abroad, he said.

China's trade surplus swelled 74 percent to 177.5 billion U.S. dollars last year and exceeded 140 billion U.S. dollars with the United States, which caused some Western politicians to call for a faster rise in the value of the yuan.

The People's Bank of China in July 2005 scrapped a direct peg between the yuan and the US dollar. The Chinese currency, allowed to move 0.3 percent a day on either side of a parity rate based on quotes from market-maker banks, has since risen 6.5 percent.

Zhou said last week that a wider trading band for the yuan is possible.

"Time is still needed to gradually adjust and finally solve" the problem of trade imbalances, he said yesterday.

The central bank chief reiterated that the central bank will continue to use measures including bill issuance and hikes in lenders' required reverses to mop up excess liquidity.

In addition, the country plans to bail out more financial institutions and allow more lenders to diversify into the fund-management business this year, according to Zhou.

Asked whether he agreed that a stock stumble in Shanghai late last month was the trigger for a global decline, Zhou didn't directly respond, but he noted that multiple factors affect equity performance.

"China used to think that its (capital) market was a relatively small one, a fledgling market still under construction," Zhou said.

The interrelation of the recent volatility around the world "shows the need for China to step up efforts to expand its markets," he said.

China's trade balance within normal scope, official(2007/03/13)
The Ministry of Commerce will take further steps to rein in surging trade surplus this year, said Bo Xilai, minister of commerce.
Many policies are being mulled, Bo said, but failed to provide further details.
China's surging trade surplus was led by unbalanced structure of export, but the trade balance was in a normal scope, Bo was quoted as saying by China Securities Journal.
Bo said, "We have noticed that China's trade surplus was high last year, so we have set it a target to maintain a balance between international income and expenses, and pursue a balance in international trade."
However, Bo said, trade surplus has been a target every trade partner pursues.
In terms of trade balance, China's trade surplus only accounted for 10 percent of the country's total imports and exports, Bao said. "Generally speaking, the trade surplus is within normal scope."
If unbalanced trade means the proportion of trade surplus to the total trade volume is higher than 10 percent, it is known that Germany and Japan have reported a ratio higher than 10 percent for more than 10 years, Bo said.
China's trade surplus surged by 74 percent year-on-year to reach 177.47 billion U.S. dollars last year. In January this year, China's trade surplus was 15.9 billion U.S. dollars, lower than the 21 billion U.S. dollars for December of 2006 but still moving up by over 60 percent year-on-year.
Experts said that China's increasing trade surplus reflected the imbalance between the country's excess economic capacity and lower domestic demand. Some others said the fact that processing trade makes up 50 percent of China's total trade and foreign-funded enterprises are the major exporters, which also contributed to surging trade surplus.
To reduce the hefty trade imbalance, Chinese Premier Wen Jiabao called for efforts to optimize mix of imports and exports, and re-balance pattern of trade growth.
To ease trade imbalance, measures should be taken to expand imports, said Mei Xinyu, a research fellow with the International Trade and Economic Cooperation Research Institute under the Ministry of Commerce.
　

Capital to build more economical housing(2007/03/12)
Beijing will build 20 million square meters of low-cost housing in the next three years in a bid to meet demand.
The city will also begin construction work on 300,000 square meters of affordable rental housing, the Beijing Morning Post reported.
This means Beijing will have about 80,000 inexpensive new apartments each year entering the market in the next three years.
The Ministry of Construction requires 70 percent of new condominium development projects to have a floor space of no more than 90 square meters.
The figure will account for 30 percent of the city's annual housing supply, the Beijing-based China Business Times said.
A special office to oversee the exploration and management work on housing has been set up, the Beijing News reported yesterday.
Beijing's move is in line with a recent State policy shift that encourages property developers across the nation to build more housing for low-income earners.
At a central government meeting late last month, which heard a report on Beijing's regulation of the real estate market, Vice-Premier Zeng Peiyan said Beijing needs to stabilize housing prices and regulate the market so as to promote its healthy development.
Zeng said: "There should be a multi-tiered housing supply mechanism, and it is imperative to make it easier for low-income families to buy homes."
　

China mulls supervision system for overseas investment by central SOEs(2007/03/09)
China is considering setting up a supervision system for overseas investments by central state-owned enterprises (SOEs), sources with the State-owned Assets Supervision and Administration Commission revealed on Thursday.
The aim is to regulate central SOEs' offshore investment activities and reduce their exposure to risk, the sources said, but did not provide details of the possible supervision system.
In recent years, China has opened wider to the outside world and encouraged more and more domestic businesses to "go abroad".
Last year, Chinese enterprises made direct offshore investments of more than 16 billion U.S. dollars, up 32 percent on the previous year.
By the end of 2006, Chinese enterprises had launched more than 10,000 offshore operations, involving a total investment of 73 billion U.S. dollars. Central SOEs contributed significantly to the investment growth, the sources said.
But problems have cropped up in the "going abroad" process, the sources added, citing the scandal of China Aviation Oil Ltd.
In 2004 Chen Jiulin, former vice general manager of the central SOE and former president of the company's Singapore operations, was sacked from his post for generating a loss of 550 million U.S. dollars from futures speculations.
People responsible for the scandal were penalized in early February this year. Alarmed by the scandal, the commission felt it was necessary to take stricter measures to supervise overseas activities by central SOEs, the sources said.
　

China mulls over integrated listing of central enterprises（2007/03/08）
China is working on a scheme for the integrated listing of enterprises under the direct management of the central government, known as "central enterprises", a political advisor has revealed.
The scheme is expected to be worked out within this year, and central enterprises will go public mainly on domestic A-share market, said Zhu Tao, former chairman of the board of supervisors of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.
The integrated listing may lead to the decline of state-owned equities in the enterprises, but won't weaken state control over them, said Zhu, who is attending the annual session of the National Committee of Chinese People's Political Consultative Conference (CPPCC), China's top political advisory body.
It will help improve the operation of state-owned enterprises, he said.
Minister in charge of the SASAC Li Rongrong also revealed previously that the commission will push forward the shareholding transformation of the central enterprises this year and have their parent companies or main operations listed on the stock market.
China now has 159 central enterprises, which had total assets exceeding 12 trillion yuan at the end of 2006. The SASAC plans to reduce the number of central enterprises to between 80 and 100 by the year 2010 through restructuring.
At present, many subsidiaries of central enterprises have been listed on domestic or overseas stock markets.
　

Economist recommends interest rate rise to prevent economic bubbles（2007/03/07）
China should raise its benchmark interest rate step by step to prevent economic bubbles, said Zuo Xiaolei, chief economist with Galaxy Securities Company in an article published in China Securities Journal Monday.
China is very cautious about further interest rate hikes, fearing that they will entice more speculative funds into the country and accelerate the formation of economic bubbles.
China deliberately keeps its Renminbi interest rate 3 percentage points below the U.S. dollar rate, in order to maintain a high opportunity cost for overseas capital entering China, Zuo said.
But since investors are convinced that the Renminbi will continue to appreciate, the 3-percentage-point gap will not prevent foreign capital from flowing into China and buying assets in the country, Zuo said.
But raising interest rates step by step will restrain the money supply, help solve the problem of excessive liquidity and reduce the possibility of economic bubbles, she said.
To date the central bank, the People's Bank of China (PBOC), has preferred to raise the deposit reserve ratio -- rather than interest rates -- to fight excess liquidity.
The PBOC announced on Feb. 17 that it would raise the country's required reserve ratio by 50 basis points from Feb. 25, just 40 days after the previous increase, the fifth hike since July 5, 2006.
The rate hike increases the reserve ratio to 10 percent. Rough calculations indicate that the rate increase will siphon about 170 billion yuan of banking funds from the market.
But with the country's trade surplus continuing to widen, the liquidity problem will not go away anytime soon.
　

China seeks more channels to use foreign exchange reserves(2007/03/06)
China is seeking more channels to use its massive foreign exchange reserves, which are expected to continue growing after it quintupled in the past five years, said some financial experts before the annual session of the country's top political advisory body that opens Saturday afternoon.

Contrary to its past policies, the country is implementing stricter regulation on incoming foreign exchanges and loosening rigid controls on outgoing reserves, said Huang Zemin, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and head of the International Finance Institute of East China Normal University.

The foreign exchange reserves reached 1.066 trillion U.S. dollars at the end of 2006, up from 212.2 billion dollars at the end of 2001, according to the People's Bank of China.

The advisor said the country is seeking more channels to ease the pressure generated by rising foreign reserves, allowing businesses to keep a larger share of their foreign income and encouraging overseas financial investment in the form of qualified domestic institutional investors (QDII).

The State Administration of Foreign Exchange (SAFE) granted 15 banks overseas investment quotas totaling 13.4 billion U.S. dollars in 2006. Meanwhile, 15 insurance companies were granted overseas investment quotas of 5.17 billion U.S. dollars and one fund management company was given a quota of 500 million U.S. dollars.

The Chinese government should make use of its foreign reserves and play a more active role in world economy, said CPPCC National Committee member Guo Guoqing, a professor with the Renmin University of China based in Beijing.

Guo suggested China use part of its trade surplus to import technologies and resources.

More than 2,200 CPPCC National Committee members are expected to gather for the Fifth Session of the 10th CPPCC National Committee that will last 12 days.

National zones to get policy support（2007/03/02）
The Ministry of Commerce will formulate new policies to help national economic and technological development zones overcome difficulties following the unification of corporate income tax rates, a senior official said.
Li Zhiqun, director of the ministry's foreign investment department, said on Sunday that the ministry, together with the Ministry of Science and Technology and Legislative Affairs Office of the State Council, will speed up work on the establishment of management polices for such zones.
Foreign investors in China's development zones now enjoy favorable taxation rates as well as tax waivers and incentives, compared to their Chinese counterparts.
But according to a draft law the country will unify income tax rates for domestic and foreign companies and the favorable policies will also be scrapped.
Apart from taxation, the zones also face problems in land resources and increases in labor costs.
Foreign investors will be encouraged to devote more to high-tech industries and advanced manufacturing in development zones in East China, while zones in western and central parts will get more support in infrastructure construction and training.
Issues such as intellectual property rights protection, innovation and environmental protection will be major factors when evaluating these zones, Li said.
According to statistics from the Ministry of Commerce, China's national economic and technological development zones contributed nearly 10 percent of the total industrial output, 15 percent of exports and about a quarter of realized foreign direct investment in the first nine months of last year.
　

China's per unit GDP energy consumption down 1.23% in 2006（2007/03/01）
China's per unit GDP energy consumption fell 1.23 percent in 2006, missing the projected target, official figures released Wednesday show.
The National Bureau of Statistics (NBS) said energy consumption per 10,000 yuan (1,292 U.S. dollars) of gross domestic product (GDP) amounted to 1.21 tons of coal equivalent in the year.
The Chinese government set a goal of reducing energy consumption per unit GDP by 20 percent in the five-year period from 2006 to 2010. The goal for 2006 was four percent.
This is the first time for China to see an annual decline in its energy consumption per unit GDP since 2003, despite a 0.8 percent rise in the index in the first half of last year.
According to preliminary estimates by the NBS, China consumed a total of 2.46 billion tons of coal equivalent in 2006, up 9.3 percent from a year earlier. The growth is 1.4 percentage points lower than China's GDP growth of 10.7 percent in the year.
China's energy consumption soared 15.3 percent in 2003 and 16.1percent in 2004, both of which were over five percentage points higher than the GDP growth of the corresponding years.
Energy consumption dropped to 10.6 percent in 2005, still higher than the year's GDP growth.
Zhou Dadi, researcher with the the Energy Research Institute of the National Development and Reform Commission (NDRC), said the decline shows that China's efforts in cooling its economy and reducing energy consumption have begun to take effect.
However, failure to meet the annual goal of the government shows that the Chinese economy is still growing in a way that relies too much on energy and resource consumption, said Zhou.
China saw an increase in its total energy consumption in 2006. The consumption included 2.37 billion tons of coal, up 9.6 percent year on year; 320 million tons of crude oil, up 7.1 percent; 55.6 billion cubic meters of natural gas, up 19.9 percent; 416.7 billion kilowatt-hours of hydropower, up 5 percent; and 54.3 billion kilowatt-hours of nuclear power, up 2.4 percent.
The 9.6 percent rise of coal consumption shows that China's economic growth still relies too much on coal, which is comparatively dirty and inefficient, said Zhou.
Han Yongwen, secretary-general of the NDRC, said earlier during an on-line interview that it would be a time-consuming and step-by-step process for China to improve its industrial structure and change the economic growth mode.
Last year, all the provincial governments set their targets of reducing energy consumption in the 11th five-year period.
The NDRC announced in January this year that China would close small coal-fired power units with total annual capacity of 50 million kilowatts over the next four years, in a move to reduce the country's energy consumption by four percent.
Xie Fuzhan, director of the NBS, predicted earlier this year that as fiscal, tax and price policies came into effect and the industrial restructuring sped up, China would see greater reduction in energy consumption in the coming years.
　

Gov'ts to favor China-made innovative products（2007/02/28）
China plans to give priority to innovative products produced by Chinese-owned or -controlled enterprises in government procurement, an official said here on Monday.
Such innovative products needs to be certified before they can be recommended for government procurement and major engineering projects, according to new regulations issued at the end of 2006 by the Ministry of Science and Technology (MOST), the National Development and Reform Commission and the Ministry of Finance.
Qin Yong, a deputy director with MOST, said companies, including joint-ventures that are majority owned by Chinese, can register their products with the National Innovative Products Listwhich is scheduled to be issued later this year.
The products must be high quality with registered intellectual property rights, according to the regulation.
MOST is preparing an application and evaluation process which will be completed this year, said Qin.

CPC leadership: Macro-economic measures must be improved（2007/02/17）
China will rely more on legal and economic measures to rein in its fixed assets investment and lending, according to a press release from the Communist Party leadership on Thursday.
At a conference to discuss the central government's work report, the Political Bureau of the Central Committee of the Communist Party of China agreed that the government should look for ways to improve and strengthen macro-economic measures to regulate economic activities.
"This year is of critical importance for the development of the Party and the state," the press release said. "Thus, the government should stick to prudent fiscal and monetary policies to maintain economic stability."
The conference, chaired by Chinese President Hu Jintao, decided that the macro-economic measures should focus on tightly regulating the fixed assets investment and the scale of bank loans.
And both the central and local governments should be mobilized in heading towards the same goal, with policies drawn up by the central authorities being fully implemented across the country, it said.
Despite the government's cooling measures, China's gross domestic product (GDP) surged by 10.7 percent year-on-year to reach 20.94 trillion yuan (2.7 trillion U.S. dollars) last year. It was the fourth straight annual double-digit growth rate, driven by hefty investment and rocketing trade, both of which registered a 24 percent year-on-year growth.
The economy grew 10 percent in 2003, 10.1 percent in 2004, and 10.4 percent in 2005.
　

January Sees 13.9% FDI Rise(2007/02/16)
For its first FDI report card of the year, China saw its foreign direct investment (FDI) leap US$5.18 billion in January, up 13.9 percent on a year earlier, with China receiving some US$5.18 billion in FDI last month, the Ministry of Commerce said yesterday.
"Domestic purchasing power is playing a bigger role in attracting foreign investment," said Tim Condon, an economist at ING Bank NV in Singapore. "But China also remains a very attractive destination for companies relocating plants."
Foreign investors remain on a lucrative hunt in China despite the country's unification of all corporate income taxes from both foreign-invested and domestic companies, a move set to remove foreign-funded businesses of favorable tax rates from 2008 onwards.
The move is part of the government's reposition from a previous desire for maximum investment to a sharper focus on quality investments.
The Ministry expects the 2007 FDI to match last year's, but is hoping to increase both quality and efficiency. The total FDI was US$63 billion in 2006.
As it bolsters the growth of manufacturing sectors offering high added-value and services industries, the government is considering environmental impacts and has stopped approving foreign investors who pollute or show themselves to be inefficient.
FDI to the less-developed central and western parts China is also being promoted.
In the course of last month, the ministry approved 3,370 foreign-invested enterprises last month, up 10.71 percent year-on-year. The total contracted investment was not disclosed however pending the fulfillment of numerous agreements.
While Hong Kong, the Virgin Islands and South Korea were the top three sources, FDI from US companies have increased by close to a third since last year.
　

China's economy to grow fast, face more external imbalance: World Bank（2007/02/15）
The World Bank said in Beijing Wednesday that China's economy may still enjoy favorable prospects in the near time, with a possible high growth rate of 9.6 percent thisyear.
It also warned in its latest China Quarterly Update that the country must cultivate new sources of growth to rebalance it economic expansion.
"China still has a vast potential for catching up in productivity, but China's industry, investment and export based growth has become increasingly problematic because of trade tensions and environmental and resource constraints," said Louis Kuijs, senior Economist on China and main author of the Quarterly.
"With a growth pattern that relies more on services, and more labor-intensive urban growth, more of growth could come from reallocation of labor out of agriculture."he said.
Kuijs contended that growth along such rebalanced patterns could boost urban employment, wages and household incomes and reduce rural-urban disparities, while mitigating external imbalances.
The Washington-based group stood by its previous quarterly update on November 14, insisting that China's internal macro challenges remain manageable despite the growing external imbalance.
"Policy measures that address domestic concerns could ideally also reduce the external imbalance," says Bert Hofman, Lead Economist for China of the World Bank.
Hofman said that the government had already decided on a dividend policy for state-owned enterprises and a more rapid increase in spending on health and education, and has stepped up the pace of currency appreciation.
"These measures tend to reduce investment and increase consumption, and are thus steps in the right direction", he said.
But Hofman warned that containing investment growth and inefficiency on a more sustainable basis would call for structuralpolicies that addressed the underlying causes of inefficiency and excess investment.
China's economic growth eased slightly in the second half of 2006 as investment cooled in response to tightening measures. However, as exports continued to outpace imports by a wide margin,the impact on overall growth by a cooling investment was largely offset.
As a result, China's external surplus reached new highs, while foreign reserve accumulation continued apace. Surging stock pricesprompted government measures to slow new funds moving into the stock market, noted the report.
China's exporters and manufacturers have been affected by several recent policy measures to rebalance the economy, including tax measures and appreciation, and more such measures are likely to follow.
But continued productivity growth and a resilient world economy promise only a minor export slowdown, warns the update.
Domestically, the fundamental drivers of investment remain, and investment is therefore unlikely to slow drastically in 2007, while boosting consumption will remain challenging, particularly in rural areas.
The World Bank report says China's external imbalance is unlikely to shrink much in the near term, and considers a significant surge in inflation "unlikely".
The Quarterly Update also deliberate upon the possible influence of China's third national financial work conference held in January, which set out directions for future financial sector reform in the key areas of rural finance, foreign exchange management, and policy banks.
On rural finance, it was decided to reduce the access thresholds for financial institutions to attract a more diverse set of providers and to continue the reforms of the Agricultural Bank of China.
The Quarterly notes that rural finance would also benefit from interest rate liberalization and further reforms in existing providers.

Trade surplus rises despite effort to cut it（2007/02/14）
The trade surplus hit $15.88 billion in January, piling pressure on the government which has made it a priority this year to reduce the imbalance.
The figure was a 65 percent rise year-on-year, although it dropped markedly from $21 billion in December, according to the General Administration of Customs.
Officials attributed the year-on-year increase to seasonal factors and because Spring Festival, which sees considerably less trading businesses, was in January last year.
The government has taken a series of measures to stop the surplus from widening. It has not only prohibited processing trade and scrapped export tax rebates in some high-pollution and energy consuming sectors, but also provided tax rebates to imports of parts and materials for key equipment.
The impact of these measures is expected to gradually materialize this year.
The increasing surplus has resulted in a testy relationship with some key trading partners such as the United States and the EU.
Washington has filed a complaint to the World Trade Organization claiming that the Chinese government grants industrial subsidies to exporters. "I don't think the surplus will sharply decline this year, say by 50 percent," said Mei Xinyu, a trade expert at the Chinese Academy of International Trade and Economic Cooperation.
But that does not mean China's attempts to cut the surplus are futile.
"The surplus would have been even bigger without these efforts," he said.
He added that some local governments still regard export growth and foreign investment inflows as major criteria to measure achievements, which counteract the policies of the central government.
Total trade volume reached $157.36 billion last month, up 30.5 percent year-on-year. Imports rose 27.5 percent to $70.74 billion, and exports increased 33 percent to $86.62 billion.
The European Union, the United States and Japan remain the top three trade partners of the country while India surpassed Canada to become the 10th biggest.
Processing trade increased 25.7 percent year-on-year to $70.7 billion while general trade increased 33.2 percent to $71.12 billion.

RMB drops against U.S. dollar(2007/02/13)
The value of the Renminbi (RMB) yuan against the U.S. dollar dropped on Monday with a central parity rate of 7.7632 yuan, according to the Chinese Foreign Exchange Trade System.
Monday's central parity rate of the RMB was 57 points lower than that for Friday.
The value of the Chinese currency yuan against the U.S. dollar hit a new high for the 12th time since the beginning of the New Year on Feb. 7, with a central parity rate of 7.7496 yuan to the dollar, according to the Chinese Foreign Exchange Trade System.
RMB fell to 7.7526 yuan and 7.7575 yuan against the dollar in the following two days.
The central parity rate of the RMB to the Hong Kong dollar dropped by 81 basis points to 0.99349 yuan on Monday.
There was no immediate comment from authorities on the fall.
The central parity rate of the RMB against the British Pound rose 304 basis points to 15.1595 yuan on Monday.

Survey: China's salary hike tops world three(2007/02/09)
Chinese can expect huge salary increases in 2007, said a survey conducted by the human resources consultant ECA International.
Benefiting from the growth of the economy, from human resource shortages and the decline of the inflation rate, workers in China will see a wage increase of 6 percent in 2007, ranking third in the world wage hike record.
It is Asian countries that lead the global wage increase, with an average continental expected - rise of 3.6 percent - one and a half times the expected-rise in 2006.
The strong driving power of the economy has been sped up by the appearance of millionaires and private banks entering the region.
The survey covers 45 countries. India, expecting 7 percent growth, topped first in the salary survey. Americans will probably see wage rise of 1.1 percent.
The top ten countries listed in the survey are India, Indonesia, China, Philippines, Thailand, Slovak, South Korea, Malaysia, Egypt and Russia.
　

RMB hits new high against U.S. dollar（2007/02/08）
The Chinese Renminbi (RMB) again climbed to a new high against the U.S. dollar on Wednesday to reach a central parity rate of 7.7496 yuan to the dollar.
The RMB gained 99 basic points from Tuesday's rate of 7.7595 - the 12th time it has set a new record since the beginning of the new year, climbing 591 basic points in the process.
The yuan has appreciated around 4.5 percent since it was revalued on July 21, 2005.
There is widespread speculation that the exchange rate of the RMB will be on the agenda at the G7 meeting in Germany at the weekend and Ye Yaoting, an analyst with the Bank of Communications,said this had contributed to the appreciation of the yuan.
Xiang Junbo, vice governor of the People's Bank of China, said at a national conference on bank loans and financial markets earlier in the week that China would steadily improve the flexibility of the RMB exchange rate this year.
Experts believe further appreciation will help China reduce itstrade surplus, which stood at 177.47 billion U.S. dollars in 2006,up 74 percent on the previous year.
"It would be ideal to raise the annual appreciation rate of theyuan to five percent from the current level of three percent. Onlythen can we cut the trade surplus effectively," Song Guoqing, a professor at Peking University's China Center for Economic Research, said Wednesday.
However, Lin Yifu, Song's superior and director of the center, previously said on Sunday that the 0.6 percent appreciation rate in January alone was too rapid.
　

Chinese gov't "regrets" U.S. subsidies complaint(2007/02/07)
The Chinese government said it regrets a U.S. decision to bring Beijing before the World Trade Organization (WTO) over its industry subsidies.
The U.S. government filed a complaint last Friday with the global trade body against China's industry subsidies.
"It's a pity the United States has sought the consultation process at the World Trade Organization," said a Chinese commerce ministry spokesman.
The spokesman said the Chinese government was reviewing the U.S. case, adding that the two sides had "kept bilateral contact over the issue all along". But he declined to disclose detailed information.
The U.S. Trade Representative Susan Schwab said tax breaks and tariff exemptions encourage Chinese companies to buy Chinese-made equipment rather than imports, while financial incentives help firms to export their goods. She said the time for negotiations had been "exhausted".
The U.S. claims China's State subsidies for steel, paper, information technology and other industries allow China to export its goods on the cheap, preventing U.S. firms from being able to compete fairly, both at home and in other markets.
Unnamed insiders close to the situation said the complaint also pointed to China's preferential corporate income tax for foreign investors.
According to WTO regulations, the Chinese government has five days to accept the consultation appeal and Washington and Beijing should enter into formal consultations at the WTO.
If they fail to resolve the matter within 60 days, the U.S. can appeal to a WTO dispute settlement panel for a decision. No third party has asked to be part of the consultation.
It is the third time the United States has brought China before the WTO since it joined the organization in 2001.
"The U.S. complaint this time covers a vast range of areas," said Li Xiangyang, a researcher with the Chinese Academy of Social Sciences.
The tense trade relationship between the two economies is largely the result of China's yawning trade surplus with the U.S.. The U.S. government has not only initiated an increasing number of anti-dumping charges against Chinese products, but has also adopted other measures such as WTO complaints and countervailing measures to protect its industries.
Li said the U.S. had not provided reasonable evidence on China's industry subsidies.

Yuan's climb expected to continue（2007/02/06）
The yuan is expected to gain further ground this week amid optimism of China's strong economic growth and swelling trade surplus. Analysts said the yuan will climb further over the coming five days.
The Chinese currency closed at 7.7560 against the United States dollar on Friday, up from the 7.7758 from the previous week.
The yuan has gained more than six percent since July 2005, when the central bank abandoned the decade-long fixed exchange rate of 8.28 to the U.S. dollar.
Analysts expect the yuan to rally for the entire year as China puts the ballooning trade gap near the top of its 2007 agenda.
The country's trade surplus rose to 177.5 billion U.S. dollars last year from 102 billion dollars in 2005.
The gap may further widen to 189 billion dollars this year as the country remains a major investment destination for global companies, said a report by the Academy of Macroeconomic Research, an affiliate of the National Development and Reform Commission.
Meanwhile, the Chinese economy grew 10.7 percent in 2006, the biggest increase in 10 years. The central bank's research unit predicted the economy is likely to cool this year under macroeconomic controls, but could still grow 9.8 percent.

Companies lacking social responsibility criticized(2007/01/31)
A lea ding lawmaker slammed Chinese companies for blindly pursuing profit and neglecting their social responsibilities and suggested legislation to buck the trend.
"The practice is serious and widespread among Chinese firms. Like other countries, China can no longer tolerate it," Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress, said in a signed article published Monday in China Economy Weekly, a magazine run by the Party's mouthpiece - the People's Daily.
Reckless practices include private coal mine bosses pushing farmers to work in hazardous conditions, food company managers using cheap industrial materials to make products for human consumption, and factories discharging torrents of pollution, Cheng said.
He said these "irresponsible practices" have prevented Chinese companies expanding their business overseas. But he said the problem was not only one for domestic companies and issued a warning: "Even in developing countries, foreign companies that turn a blind eye to their social responsibilities will be kicked out of the market."
Society expects companies not only to produce economic profits but also to promote equality and social justice, and balance the interests of different groups, Cheng said, adding that business affects politics, culture, social values, and especially the environment.
Cheng said it is important to provide for severe legal sanctions for companies that shirk their social responsibilities when they do business; otherwise it is unfair to "responsible companies."
But he did not say in the article how the legislation would work.
"Prompted by both ethics and the law, I believe more and more companies and entrepreneurs will shoulder their share of responsibility to society," Cheng said.
　

China may achieve industrial economy by 2015(2007/01/30)
A report by China's top scientific institutions says that China is likely to be transformed from an agricultural into an industrial economy by 2015.
By then, its social and economic indicators will reach the level of developed countries in 1960s, says China's Modernization Report 2007.
The report details research and opinions of experts and scholars in the Chinese Academy of Science, the Ministry of Science and Technology and China's elite universities.
The prediction was based on China's economic growth from 1980 to 2004.
Since China started economic reform and opening-up, it has maintained an average annual growth rate of 9.6 percent.
The report lists ten indicators to evaluate the industrialization process. It said China has achieved six of them, including life expectancy, adult literacy and accessibility of higher education.
But China still has to improve four other indicators: GNP per capita; the added value of the service industry; the proportion of the work force in agriculture; and the percentage of urban residents among the total population.
　

Economy grows fastest in 11 years（2007/01/29）
The economy turned in another sparkling performance last year, with gross domestic product (GDP) growing at the fastest clip in 11 years and inflation moving below 2 percent.

The National Bureau of Statistics (NBS) yesterday announced that GDP grew by 10.7 percent to reach 20.94 trillion yuan ($2.68 trillion). The consumer price index, a key indicator of inflation, inched up by a mild 1.5 percent.

"In 2006, the economy was in good condition," NBS Director Xie Fuzhan told a press conference organized by the State Council Information Office.

The economy, which overtook Britain in 2005 to become the world's fourth biggest, is moving closer to that of Germany, which is estimated to have grown by 2.2 percent last year to $2.86 trillion.

The World Bank predicts the Chinese economy will grow by 9.6 percent this year; and other mainstream economists put their forecasts at a minimum of 8.8 percent.

That means the nation has a good chance to become the third biggest economic power by 2008 but Xie would only say that he believed "the economy will maintain a momentum of rapid, steady growth this year".

In 2006, the economy grew on the back of strong growth in investment, exports and consumption.

Fixed asset investment expanded by 24 percent, down two percentage points from in 2005.

The government made strenuous efforts to tame investment growth last year to avoid overheating.

The central bank twice jacked up interest rates and thrice raised the proportion of deposits that banks must hold in reserves. On January 15, it raised the required reserve ratio again. The central government cracked down, too, on investments that were against the country's development guidelines.

Xie, who was a senior researcher at the State Council Development Research Centre before joining the NBS in October, said he was worried in 2005 that the economy was heading toward overheating. The cooling-down measures helped avoid that, he said.

However, economists believe the authorities will not relax their tightening measures for credit and investment. In particular, a 2.8 percent growth in the consumer price index last month could well trigger a new interest rate hike or a further rise of the reserve ratio for banks, said Frank Gong, chief economist of JP Morgan.

On the external front, the government may need to be more aggressive in dealing with its swelling trade surplus, said Ben Simpfendrer of the Royal Bank of Scotland.

China's exports grew 27.2 percent in 2006 while imports expanded by 20 percent, resulting in a surplus of $177.5 billion, compared to $100 billion the previous year.

The surging trade surplus has increased friction with trading partners. The country's hefty foreign exchange reserves, which can largely be attributed to the huge trade surplus, have also contributed to rapid investment growth by adding to the money available for lending by banks.

"It is not in China's interests to have such a large trade surplus," said David Dollar, the World Bank's country director for China.

China's top policy makers have said curbing the trade surplus will be a focal point for the country's economic endeavors this year.

Stimulating domestic consumption will be another theme, as it has been in recent years.

Growth of retail sales, a key indicator for consumption, accelerated by 13.7 percent last year as compared to 12.9 percent in 2005. But the rate still lagged behind investment growth by a big margin.

Economists generally agree that the country needs to improve education, healthcare and social security systems to reduce the money that citizens have to put aside for these purposes.

But that cannot be achieved overnight, Xie said.

Dollar said China could collect dividends from profitable State enterprises and use the money to improve education and health systems which would reduce investment growth and increase consumption.

Overall, the prospects for the Chinese economy this year are favorable, Dollar said.

"There is no big danger for the Chinese economy in 2007," he said.
　

China's GDP grows 10.7 pc in 2006（2007/01/26）
A preliminary estimate by the National Bureau of Statistics (NBS) Thursday indicates that China's gross domestic product (GDP) reached 20.94 trillion yuan (2.7 trillion U.S. dollars) in 2006, up 10.7 percent year on year. 　
The government's macro-control measures prevented the economy from overheating, said NBS commissioner Xie Fuzhan at a press con