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Commodity, housing prices to be focus of "Two Sessions"

03-04-2011 17:01 BJT Special Report:2011 NPC & CPPCC Sessions |

Commodity and housing prices are expected to be two of the hottest issues to be discussed by China's policy-makers and political advisors during the upcoming annual "two sessions", analysts said.

The fourth session of the 11th National People's Congress (NPC) and the fourth session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), which are scheduled to open in Beijing on March 5 and 3 respectively, will review and approve the outline for the nation's 12th Five-Year Plan that covers the period for 2011 to 2015.

According to an online survey jointly conducted by Xinhuanet.com and Sina.com among nearly one million people surveyed as of 3:00 p.m. March 1, the top five concerns are housing prices, income distribution, inflation and commodity prices, combating corruption, and employment promotion and equal employment opportunities.

COOLING HOUSING PRICES

China's housing prices have been climbing steeply since June 2009, fueled by record bank lending and tax breaks. The monthly year-on-year growth rate hit a record 12.8 percent in April last year.

To cool the market, the Chinese government this year issued a new package of policies that include purchasing restrictions, property taxes, and the increasing availability of government-subsidized flats.

More than a dozen Chinese cities, including Beijing, Shanghai, and Tianjin, have capped the number of apartments a family can buy, making it difficult for non-residents to buy apartments for investment.

Housing prices were still rising, with prices of new properties in 68 of 70 major cities up from one year earlier in January.

According to the National Bureau of Statistics, 10 of the 70 surveyed cities reported double-digit increases in new home prices.

Regardless of the impact, the series of moves show the government's determination to cool the housing markets, analysts said.

Chinese Premier Wen Jiabao said Sunday during an online chat with the public that the government would work to increase housing supplies, with 36 million affordable homes planned by 2015, including 10 million this year. Last year saw the start of construction of 5.9 million affordable homes.

The central government had signed strict agreements with provincial governments to guarantee the construction of 10 million subsidized apartments this year, Wen said.

The government would also step up efforts to develop low-rent public housing, added Wen. With its huge population and limited land, China's property policy should be appropriate to its situation, which does not mean that all Chinese citizens will own their own homes.

Wen also said that the government would "resolutely" curb demand for home purchases for investment and speculation.

Home sales fell sharply after the announcement of the housing purchasing restrictions. Beijing alone reported the sales of 3,436 new homes in February, down 70 percent from sales figures in January, according to Beijing's real estate transaction management website, which is operated by the municipal commission of housing and urban-rural development.

Existing home sales slumped 64.3 percent month-on-month to 8,376 units in February, the lowest volume in 25 months.

Housing prices remain stable nationwide and prices of more than 90 percent of Beijing's housing projects were also stable last month, said Zhang Dawei, an analyst with the Centaline Property in Beijing. Centaline Property predicts no large correction in housing prices in the city, as supply remains at low levels in the first half of 2011, he said.

Property developers have adopted a wait-and-see attitude towards the series of policies. Analysts said that control of housing prices would largely depend on the policies' continuity and the government's power of execution.

TAMING COMMODITY PRICES

According to the online survey, increasing people's income and controlling commodity prices are the second and third most popular topics, after housing prices. Premier Wen Jiabao also reiterated his determination to tame rising commodity prices during his tenure, vowing that he "will not allow consumer prices to rise unchecked."

China's statistics agency said in January that inflation remained high at 4.9 percent, despite a series of measures to dampen price rises that includes three interest rate hikes since October last year.

"I check the price index everyday and I know very well the prices of grains, oil, meat, eggs and vegetables," said Wen. "I clearly know the impact of prices on the country."

Influential Chinese economist Li Yining said that the government must control inflation while maintaining economic growth in its new five-year plan.

Li serves as the deputy director of the Economic Commission of the 11th National Committee of the CPPCC, the country's top advisory body.

He said that China could adopt a mandatory "commercial reserve" system to prevent hoarding of common consumer items in times of shortage or rising prices.

The current inflation had various causes, such as raw materials shortages and agricultural produce price increases, but speculation and rising labor costs were new factors, he said.

"Salary growth and commodity price increases keep reinforcing each other, like a leapfrog game in which two kids jump over each other in turn," said Li days before China's annual two sessions.

"To cope with the rising agricultural produce prices, we can adopt a commercial reserve system in which businesses, such as big supermarkets, will have mandatory reserves," he said.

"In this way, people will not panic and hoard goods. It can also make up for the shortcomings of the national reserve, which has limited stocks, both in amount and variety," said Li.

Editor:Yang Jie |Source: Xinhua

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