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December 17, 2016

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Leaders set course for 2017 economy

CHINA yesterday vowed to stabilize the exchange rate and curb real estate bubbles next year among measures to sustain economic growth while forging ahead with structural reform.

Policy-makers will prioritize stability in 2017 while striving for progress in key areas that include reforms and economic growth, according to a statement issued after top leaders wrapped up the annual Central Economic Work Conference in Beijing.

China’s monetary policy will be kept “prudent and neutral,” with flexibility to ensure stable liquidity, and the fiscal policy will be more proactive and effective in supporting supply-side reforms, lowering business costs and ensuring public well-being, the statement said.

China’s economic conditions have been stabilized and are improving, but conflicts between cutting overcapacity and upgrading demand remain, and the economy still lacks momentum, it said.

The conference’s major goals are to keep the exchange rate of the yuan basically stable at a reasonable level, and promote the stable and healthy development of the real estate market.

Depreciation of the yuan has been making headlines, with the central bank yesterday weakening the official guidance rate to 6.9508 per US dollar, the lowest since 2008.

In the real estate market, the latest available figures show that new homes worth 8.7 trillion yuan (US$1.25 trillion), excluding government-funded affordable housing, were sold across the nation between January and November, a year-on-year increase of 39.3 percent.

“Houses are built to be inhabited, not for speculation,” the statement said, as it pledged the establishment of a market-oriented and long-term mechanism to curb a real estate bubble and prevent erratic fluctuations.

The government will use land, investment, lawmaking, fiscal and taxation and financial instruments in order to achieve its aim, it said.

Land supply should be increased reasonably in cities under pressure from rising prices, and destocking efforts in third and fourth-tier cities should be stressed.

The statement said that China expects substantial structural reform progress in five key areas next year — cutting overcapacity, destocking, deleveraging, lowering costs and improving weak links.

Efforts should continue to reduce steel, iron and coal capacity, with a focus on “zombie enterprises,” and mergers and reorganizations will be encouraged.

Businesses with overcapacity that have halted production should be prevented from starting again, and industrial overcapacity reduction should be achieved through market and law-based means, it said.

China’s GDP recorded 6.7 percent growth in the third quarter, the same as the previous quarter. However, economic indicators for October and November indicate a recovery in momentum with inflation, foreign trade, manufacturing, investment and retail sales all picking up.


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