China to Lift Inflation Target to 4%

Chandrasekhar Atreya
15 Dec, 2010
New York City

China key stock indexes drop on inflation worries and the fast developing nation is expected to revised inflation target next year to 4% from the current target of 3%. Foreign direct investment surges to record in November.

[R]5:00 PM Hong Kong, China – China key stock indexes drop on inflation worries and the fast developing nation is expected to revised inflation target next year to 4% from the current target of 3%. Foreign direct investment surges to record in November.[/R]

Stocks in Shanghai dropped after four days of gain on the worries that accelerating inflation will lead to further monetary tightening.

The Shanghai Composite Index dropped 0.54% or 15.66 to close at 2,911.41. The CSI 300 Index also dropped 0.67% or 21.83 to close at 3,247.64.

The Hang Seng Index in Hong Kong also echoed mainland sentiments to drop 2% or 467.60 to close at 22,963.60.

China is likely to set a 4% target for inflation next year, up from this year’s target of 3%, state television said on Tuesday.

“The main targets for economic and social development set by the central government for next year are that GDP will grow by about 8% and the consumer price index will be capped at about 4%,” CCTV quoted Zhang Ping, head of the National Development and Reform Commission.

China said it will place export tariffs on certain rare earths in 2011, the Ministry of Finance said in a statement on its Web site on Tuesday.

Low import taxes will be levied on 600 important materials and components while exports of energy-intensive commodities such as coal, crude oil, fertilizers and non-ferrous metals will continue to be taxed, the ministry said in its statement.

Growth of foreign direct investment in China surged suddenly in November, according to details given out by a government ministry.

FDI in November rose 38.17% from a year earlier to $9.7 billion, significantly higher than the increase of 7.86% in October, 6.14% from September and 1.38% in August, the Ministry of Commerce said today.

Revenue from China’s software industry is expected to grow more than 20% annually over the next five years, an industry association official said on Tuesday.

In the first ten months of 2010, revenue in this sector grew 29.9% from a year ago to reach 1.09 trillion yuan, which accounted for 18% of total revenue in the information technology sector, compared with 6% in 2001, according to the Ministry of Industry and Information Technology.

“In the next five years, the country’s software revenue will grow over 20% annually and will account for 20% or more of the IT sector’s total revenue, said Zhao Xiaofan, Vice Chairman of the China Software Industry Association.

China plans to invest 4 trillion yuan to develop the smart grid in the country over the next decade, China Securities Journal reported on Tuesday.

The smart grid program is part of a plan to promote and develop applications such as remote-control panels, clothes that talk to washing machines, virtual healthcare and vehicle-to-vehicle communications.

Stock Movers

China Vanke Co and Poly Real Estate Group Co led the decliners after the China Daily reported that Beijing may introduce more measures to rein in property prices.

Vanke fell 0.7% to 8.35 yuan and Poly Real Estate, the second-largest, dropped 1.98% to 12.38 yuan. Gemdale Corp lost 1.29% to 5.92 yuan.

Air China lost 0.81% to 13.05 yuan after the airline said its passenger growth was the slowest in the last five months in November.

China Shenhua, Energy Co, China’s largest coal producer, added 1.29% to 25.19 yuan while Yanzhou Coal Mining Co rallied 1.8% to 29.75 yuan.