Renminbi interest rates may rise in 2001
The People's Bank of China plans to increase interest rates if consumer prices rise too quickly in 2001 in order to stabilize the renminbi. A report recently published by the PBOC Research Bureau said potential factors that could cause an increase of renminbi interest rates already exist. China has reduced interest rates seven times since May 1996, bringing the one-year renminbi deposit rate down to 2.25%. (ChinaOnline, 5 February) Now read the following.

Little room for interest adjustments
According to the China Securities newspaper, China's central bank has pledged to sustain stable interest rates. After the benchmark consumer price index edged up 0.4% last year, two central bank researchers in December suggested that China should not exclude the possibility of raising interest rates this year if consumer prices continued to rise rapidly. However, Hong Kong economists said it was impossible for Beijing to push up interest rates as the country faced deflationary pressure and high unemployment. (Reuters, 6 February)

RMB 20billion to be spent on rural tax reform
The government will spend RMB 20 billion annually from this year to finance a rural tax reform to ease the burden on farmers. Sporadic riots in rural areas in recent years have highlighted the need to replace arbitrary fees levied on farmers by local governments. Beijing plans to replace them with a single agricultural tax. Farming incomes have slowed in recent years because of falling grain prices. (South China Morning Post, 6 February)

What a lowered U.S. interest rate means for China
The Institute of International Trade and Economic Cooperation under the (under MOFTEC) commented that the lowered interest rates would stimulate the growth of the U.S. economy (China's largest trade partner, ranked No. 1 as an export market and No. 5 as an import country), thus generating a favorable environment for China's imports and exports. The lowered interest rates might as well exert negative impact on China's exports, as recent indications show that the renminbi would appreciate against the US Dollar, and a stronger renminbi would increase the export costs for China's export-oriented enterprises. (ChinaOnline, 6 February)

Motorola becomes largest foreign investor in China
Motorola (China) Electronics increased its investment in China last year by USD 1.9 billion, boosting its total investment in the country to USD 3.4 billion and making Motorola the foreign firm with the largest investment in China right now. (ChinaOnline, 6 February)

WTO hope inspires investment surge by Volkswagen
German car-maker VW is investing EUR 1.84 billion in China and the Asia-Pacific region during the next five years. EUR 1.6 billion would be spent in China to position the company ahead of the mainland's entry into the WTO. VW has manufacturing facilities in northeastern Changchun and Shanghai and holds a 54% market share in China. (AFP, 7 February)

Four biggest state-owned commercial banks to slash bad loans by one third
Dai Xianglong, governor of the People's Bank of China, said the four banks should aim to slash their non-performing loan ratios by one-third, or 10 percentage points, to an average of 20% in three years. He reiterated the need to increase the banks' capital adequacy ratios. The Industrial and Commercial Bank, the Bank of China and the Construction Bank are expected to approach the international standard of 8% by the end of the year. The Agriculture Bank, believed to be the weakest of the four due to its heavily policy-oriented lending activities and large overheads, has been given a year's grace to reach the same goal. Gauging the magnitude of problem loans at China's state-owned banks remains guesswork. Western analysts, applying international best practice, estimate the big four's non-performing loans account for far more than 30% of their total lending. (SCMP, 7 February)

Beijing opens banks probe
Beijing has launched a probe into mainland banks to see if funds have been illegally channelled into the stock market. The investigation has been prompted by the scandal surrounding Shenzhen-listed China Venture Capital, which is being examined by the China Securities Regulatory Commission. The full extent of the scandal emerged this week when the central figure in the scam, Lu Liang, unveiled a web of collusive conduct and blatant insider dealing and manipulation. Lu said he raised RMB 2 billion from state institutions to "stir-fry" the stock. (SCMP, 7 February)

Government supervision feared to spark decline in share prizes
Mainland stock markets declined since the Lunar New Year holiday, as many investors fear a new round of government supervision will scare away speculators and kill market optimism. Many investors worry that if the government stops illegal manipulation and speculation, panicked market makers will pull out their hot money and spark a decline. Some economists are also invoking an old Chinese proverb to describe the result of a transparent market: ''There are no fish in crystal clear water.'' (SCMP, 7 February)

Kids' spending dominates family budgets
According to a survey in some of the country's largest cities, children who are 12 years old or younger spend a total of RMB 3.5 billion every month. The survey shows that in a typical Chinese family of three, the child's consumption habits determine family spending. After savings have been put aside, 80% of families earning fixed salaries said that spending on the child exceeded what was spent on the adults. (ChinaOnline, 7 February)

China lowers interest rates for foreign currency deposits
China's commercial banks reduce interest rates on deposits in U.S. dollars, British pounds, Hong Kong dollars and Canadian dollars. In the future, China will adjust the interest rates of small-amount foreign currency deposits to bring them in line with interest rate fluctuations in the international market. This is in an attempt to coordinate renminbi and foreign currency interest rate policy and to keep currency values stable and balance of payments in equilibrium. (ChinaOnline, 7 February)

Real estate prices still on the rise, especially for rent
According to a survey by the State Development Planning Commission and the National Bureau of Statistics, which was conducted in 35 large and medium-size cities, real estate prices increased 1.2% in the fourth quarter of 2000. The price of land for residential usage rose 1.1%, while land for commercial use saw an increase of 0.2%. The survey revealed that it is becoming increasingly expensive to rent housing. House leasing fees had a substantial 5.2% increase. However, the leasing fees for commercial housing dropped 8.1%. (ChinaOnline, 7 February)