China premier warns of economic pressure
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HONG KONG -- China's Prime Minister Wen Jiabao warned Sunday of "huge downward pressure" on the Chinese economy, in the clearest expression yet of concern at the top of the country's leadership about a sharp slowdown.
During a weekend inspection tour of east-central China, Mr. Wen called for the government to "preset and fine-tune its policies in a more aggressive manner," using fiscal and monetary tools to offset the economic slowdown as much as possible. But he also tried to reassure the Chinese public, saying that the economy was "running at a generally stable pace," said Xinhua, China's official news agency.
Mr. Wen largely attributed the slowdown to weak demand from overseas, particularly Europe with its faltering economies. But in separate remarks on Saturday, Mr. Wen reaffirmed a government policy of making real estate prices more affordable, by strictly banning real estate speculation.
That policy has played a central role in the country's economic slowdown; with the exception of low-income housing, residential real estate construction has slowed to a crawl. Developers nationwide have laid off huge numbers of workers as construction sites from the factory cities of Guangdong in the southeast to manufacturing and logistics hubs like Xi'an in the northwest have cut back this year from three shifts working around the clock, seven days a week, to a single daytime shift on weekdays.
Scant accurate data are available on the extent of the decline in real estate prices. Brokers say prices have fallen 20 percent or more in the past year. A monthly government survey of older neighborhoods where few transactions take place shows a much smaller decline, however, while a separate survey of real estate developers shows that few are admitting to the steep discounting described by brokers.
The Chinese central bank announced on Thursday that it was cutting the country's regulated bank lending and deposit rates for the second time in four weeks, an uncharacteristically brisk pace. The cuts have started to rekindle the Chinese public's enthusiasm for real estate investments, with the number of transactions starting to quicken in recent weeks.
But the central bank warned banks on Thursday night to keep a tight rein on mortgage lending, and Mr. Wen said Saturday that the government's policy of improving the affordability of real estate had not wavered.
Informal tallies suggest that about a third of China's 100 largest cities have loosened the ban on real estate speculation in recent weeks to revive local markets. Mr. Wen warned that these loosening moves must be halted and reversed, and even threatened punishment for officials who tried to "cheat" on the restrictions.
The Chinese government has already adopted a series of policies to support the rest of the economy. In addition to the interest rate cuts, the government has already freed banks to lend a larger share of their deposits, subsidized the sale of energy-saving home appliances and accelerated the approval of large construction projects.
First Published July 9, 2012 12:00 am