Investment up 25.3%
Spending on factories and real estate may have jumped 25.3% in the first four months of 2007 from a year earlier, according to a survey by Bloomberg. This increase in urban fixed-asset investment suggests China’s central bank may need to raise interest rates to cool investment once again. The continued increase in investment increases the risks of China being saddled with idle factories and bad loans if there is an economic slowdown. “Three more interest rates hikes are likely before the end of the year – at a minimum,” said Michael Kurtz, an economist at Bear Stearns Asia in Hong Kong.
Controversial tax law
Chinese law makers introduced a law to increase tax burdens for companies, protecting private property and ending three decades of tax blankets for foreign investors. The new tax law would unify the tax rate for foreign-financed companies with those of Chinese enterprises at 25%. Before, Chinese companies had a higher tax rate. The law was passed at the National People’s Congress in March, after months of anticipation and speculation.
Excess in Shanghai
The Shanghai real estate market could be oversupplied by 2010, according to new research. The Shanghai Academy of Social Sciences said in a new paper that the excessive number of approvals for residential properties during the 10th Five-Year Program could dwarf demand, the South China Morning Post reported. The paper notes demand would also be affected by high prices and increasing controls on property transactions. Between 2001 and 2005, the city government approved 323.51 million square meters of land for development. Researchers say pressure will be particularly high in the city’s outskirts.
New supply in Beijing
The Global Trade Centre in Beijing promises to put a large amount of new office space on the market. The 500,000 square meter complex, located in the Third North Ring Road business area, will include five grade A office buildings, a five-star hotel, conference and exhibition centers.
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