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. China to boost export tax incentives as it battles crisis

China says foreign direct investment up 35.1 percent
Foreign direct investment in China expanded by 35.1 percent in the first 10 months of the year compared with the same period in 2007, the government said Wednesday. Foreign companies invested 81.1 billion dollars in the country in the period from January to October, the commerce ministry said in a statement on its website. The growth rate for the period was slower than the 39.9 percent rise in the first nine months of the year, as inflow moderated for the ninth straight month in October. The ministry did not provide a figure for October alone. But previous official data showed foreign direct investment in the first nine months totalled 74.4 billion dollars, meaning the inflow in October was 6.72 billion dollars, down slightly from 6.78 billion dollars year on year. "The global credit squeeze is expected to have directly weighed on foreign direct investment," said Sherman Chan, an analyst with Moody's in Sydney. "Rising risk aversion due to an unclear global economic outlook has also likely seen foreign businesses switch to a wait-and-see mode," he said. The steady yuan, which has stayed at roughly the same level against the dollar since April, has further weakened incentives for investors to enter China, Chan added. Foreign direct investment is one of the factors driving the rapid growth of China's foreign exchange reserves, which topped 1.9 trillion dollars at the end of September.
by Staff Writers
Beijing (AFP) Nov 12, 2008
China said Wednesday it would boost tax incentives for more than a quarter of export products, in the government's latest move to help shield its economy from the global financial crisis.

The State Council, or Cabinet, agreed to hike tax rebates on 3,770 export items, or 27.9 percent of all products shipped by China, with effect from December 1, the central government said in a statement on its website.

China's government has been watching with anxiety as the nation's export growth has slowed, with many factories in its industrialised south closing and its economy expanding at the slowest rate in five years.

On Sunday, it announced a four-trillion-yuan (586-billion-dollar) stimulus package to be spent on infrastructure and other projects. The plan is aimed at spurring domestic consumption to counter slowing exports.

However, Wednesday's move showed China was also willing to take steps to ensure the viability of its export industry.

The State Council had gathered for a meeting, chaired by Premier Wen Jiabao, one day after China published trade figures for October that showed export growth had slowed to 19.2 percent, compared with 21.5 percent in September.

Weaker exports are cited as among the main factors why China's economic growth hit a five-year low of 9.0 percent in the third quarter.

"(The move) further raises export tax rebates for some labour-intensive products, machinery and electrical products, and other products that have felt the biggest impact," the Cabinet statement said.

The rebates mean that Chinese enterprises can get back a certain amount of the money they have paid in value-added tax for items that have gone into the production of export goods.

The measure followed a previous round of tax rebate hikes that took effect on November 1 and affected 3,486 items.

China has said that taking measures to boost its own economy is the biggest contribution it can make in the global battle to contain the financial crisis.

However, President Hu Jintao is likely to come under pressure to do more internationally, in light of China's huge forex reserves, when he joins other world leaders at an emergency summit on the crisis set for this weekend in Washington.

At over 1.9 trillion dollars, the reserves are the largest in the world by far -- nearly eight times bigger than the 250 billion dollar bail-out fund managed by the International Monetary Fund.

The State Council meeting on Wednesday also approved several domestic projects with a combined investment of more than 29 billion dollars in its bid to keep the economy humming along, Xinhua news agency said.

They included a gas pipeline linking the country's western region with the southern economic hubs of Guangzhou and Hong Kong, and nuclear power plants in eastern and southern China.

earlier related report
China's central bank sees 520 bln yuan in Q4 loans: report
Chinese banks are expected to hand out more than 520 billion yuan (76 billion dollars) in new loans in the fourth quarter, according to central bank figures reported by state media Wednesday.

China's total new yuan loans for the year will exceed four trillion yuan, the Shanghai Securities News cited a senior central bank official as saying.

New yuan lending in the January-September period totalled 3.48 trillion yuan, up 3.6 percent from 3.36 trillion yuan during the same period last year, according to official figures.

The forecast published by the newspaper, a mouthpiece for China's securities regulator, indicated that despite the central bank's attempts to loosen lending restrictions, new loans would be smaller in the fourth quarter.

The central bank imposed strict loan controls last year and the first half of 2008 to rein in credit growth and prevent the economy from overheating.

But it has since relaxed those limits and lifted loan quotas for lenders recently as China's economic growth slowed to 9.9 percent in the first three quarters of the year from 11.9 percent in the whole of 2007.

An unnamed central bank official provided the figures in an interview detailing how it planned to help put into effect Beijing's newly announced economic four trillion yuan stimulus package, the report said.

The central bank will continue to adjust interest rates and bank reserve requirements to ensure ample liquidity and stable credit growth, the official was quoted as saying.

New loans were also down sharply in the final quarter of 2007 at 272.1 billion yuan from 817.8 billion in the previous quarter. But this was due the central bank's moves to tighten monetary policy to cap credit growth and curb excessive liquidity.

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At G20, China unlikely to heed calls for rescue
Beijing (AFP) Nov 12, 2008
China will go to the G20 meeting in Washington with a pledge to be an active participant, but it is unlikely to offer itself as lender of last resort for countries reeling from the global downturn.

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