China to limit unwanted investments

CHINA will limit unwanted investments by possibly requiring more paid-in capital of new projects to contain inflation and prevent overheating, the country's top economic planner said today.

New projects, especially those that consume large amounts of power and produce pollution, will be restricted to control fixed-asset investments, said Ma Kai, the director of the National Development and Reform Commission.

Paid-in capital will be raised for unwanted investments while support for weak sectors and key industries will be enhanced, Ma said at a conference in Beijing.

The country will map out and revise mandatory standards on energy consumption and improve the appraisal system on energy-saving, the commission quoted Ma as saying on its Website.

Renovation of traditional industries will accelerate and China will also prompt steel, cement, paper makers and machinery manufacturers to merge and restructure, he said.

In 2004, the State Council raised the paid-in capital to 40 percent from 25 percent for steel projects and 35 percent from 20 percent for cement, electrolytic aluminum and real estate projects to reduce dependence on banks and cut random investments.

Fixed-asset investment in China's urban areas rose 26.9 percent to 8.9 trillion yuan (US$1.2 trillion) in the first 10 months of 2007 from a year earlier, according to the National Bureau of Statistics.

Ma also stressed that the country will adopt stable financial policies and tight monetary policies to prevent widespread inflation and an overheating economy.

The Central Economic Work Conference said on Wednesday that the country will shift its monetary policy from "prudent" to "tight" next year.

China's consumer price index, the main gauge of inflation, rose 6.5 percent in October from a year earlier, a record high in more than a decade.

The central bank has raised one-year benchmark deposit rates five times this year to 3.87 percent to curb rapid price increases.

It also increased the reserve ratio -- the amount of money a bank must deposit with the central bank – nine times this year to 13.5 percent on yuan deposits to rein in investment.