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China will keep up its campaign to bring the housing market under control, Premier Wen Jiabao pledged on Monday, amid new evidence that the property sector is beginning to heat up again despite government efforts to reduce speculation and bring prices down.
Speaking at a meeting of the World Economic Forum in Tianjin in eastern China, Mr Wen called on local governments to take part in the drive to discourage speculation and said that limiting price increases was central to maintaining social stability.
“It is the key responsibility of all levels of governments to stabilise housing prices and to guarantee the availability of housing,” he said. “The housing issue is not only an economic problem but also an issue of people’s livelihood that affects social stability.”
Beijing unveiled a series of measures to cool the property market in April amid widespread fears of a potential bubble. However, recent figures suggested that sales of houses in many cities were taking off again.
The property market crackdown has become an important test of nerve for Mr Wen, who has staked his credibility on engineering a cooling of house prices and would risk stimulating a large bubble if he relaxed pressure on the market too quickly. However, if he squeezes the real estate sector too hard, it could lead to a sharp slowdown in the economy.
With data for August showing that the Chinese economy appears to be stabilising, Mr Wen sounded upbeat that the property measures would not hurt the short-term growth outlook. “We have the confidence, the conditions and the ability to maintain stable and relatively fast economic growth,” he said. He added that the economy was in “good shape”, although the heavy level of borrowing by local government-owned companies was a potential future headache.
Mr Wen made no mention of China’s exchange rate, which will be the subject of a Congressional hearing in the US this week, although he insisted that the level of China’s trade surplus has fallen sharply from pre-crisis levels.
Some economists believe the apparent rebound in the Chinese economy will give the authorities room to accelerate appreciation of the renminbi against the dollar in the coming weeks by 2-3 per cent, although this might not be enough to appease critics in the US as the mid-term elections approach.
Mr Wen repeated assurances that China was not creating new barriers to foreign investment in the country, despite a growing chorus of criticism from several large multinationals. “China cannot and will not pursue development with our doors closed,” he told the audience of international business executives. The fact that China was receiving record levels of direct foreign investment this year was evidence that the country’s public procurement policies and new rules to encourage domestic innovation did not discriminate against foreign companies.
Eckhard Cordes, chairman of Metro, the German retail group, said it was important for Mr Wen to make such “striking and clear” commitments to treat foreign companies equally. However, he added that it was “a long way from the mouth of the Premier to the person in charge of province XYZ”.
A senior Chinese official said that some of the criticism of Chinese industrial policies reflected the fact that many Chinese companies were now much more competitive. “This is a new experience for multinationals in emerging countries to meet serious local competition,” said Fang Xinghai, director general of the Shanghai government’s financial services office.