Economy

　　Inflation Eases

　　China’s consumer inflation fell to an 18-month low in April and factory-gate prices declined further， underlining sluggish domestic demand and raising concerns about deflation.

　　Consumer price index (CPI)， a main gauge of inflation， increased 1.8 percent year on year in April， down from 2.4 percent in the previous month， the National Bureau of Statistics (NBS) announced on May 9.

　　Slower increases in food prices were the main contributor to the lower CPI figure. Food prices increased 2.3 percent year on year， down from 4.1 percent in March.

　　“Inflation is too low for an economy that expanded at an annual rate of 7-8 percent， and continuously low CPI sets alarm bells ringing for deflation，” said Chen Hufei， an economist with Bank of Communications Co. Ltd.

　　“As food prices remain subdued in the coming months and money supply growth slows， we cannot see any factor that would pull inflation higher in the near future，” Chen said.

　　In April， producer price index (PPI) contracted 2 percent year on year， following a 2.3-percent decline in March， pointing to weakness in the economy， NBS data showed.

　　The two inflation readings reflect the weakness of demand including in both consumption and investment， said Lu Ting， chief China economist with Bank of America Merrill Lynch.

　　“We believe it is time for the People’s Bank of China (PBC) to contemplate easing monetary policy further，” said Liu Ligang， chief Greater China economist at Australia & New Zealand Banking Group Ltd.

　　The PBC may cut the reserve requirement ratio for banks by half a percentage point in both the second and third quarters and the government could roll out more loosening measures， Nomura Holdings Inc said.

　　Yuan Bond

　　Bank of China will list its first offshore yuan bond on the Euro MTF market of the Luxembourg Stock Exchange， according to a press release published on May 12 by Bank of China Luxembourg Branch.

　　The three-year bond amounts to a total of 1.5 billion yuan ($240 million). It was named Schengen bond， indicating for free movement within Schengen member countries.

　　“The successful launch of the Schengen bond is a further step toward the internationalization of the yuan，” said Zhou Lihong， General Manager of Bank of China Luxembourg Branch.

　　Robert Scharfe， CEO of the Luxembourg Stock Exchange， said that the choice of Luxembourg as the listing place demonstrated the confidence of the Bank of China toward Europe and especially Luxembourg as a prime international financial center.

　　Quicker Loans

　　A chief of China’s central bank has urged the country’s commercial banks to be quicker in approving and issuing loans to “eligible” home buyers， mainly first-time home buyers.

　　The statement was made by Liu Shiyu， Vice Governor of the People’s Bank of China (PBC)， when speaking to the heads of 15 commercial banks in a meeting on May 12 about housing financial services， according to a statement on the PBC’s website.

　　Liu urged the banks to “properly allocate credit resources and prioritize credit demand of first-time home buyers.”

　　Liu’s statement came amid falling home sales and cooling home prices nationwide. Official data showed sales of residential property dipped 7.7 percent during the first quarter of 2014 to 1.1 trillion yuan ($176.6 billion).

　　To curb speculative buying， the government resorted to tightening measures such as higher down payments or a 20-percent capital gains tax. Banks have raised mortgage rates for home buyers due to tighter liquidity.

　　A survey by a real estate services firm E-House China， showed that nearly 90 percent of 69 bank branches in 22 Chinese cities have stopped offering preferential mortgage rates to first-home buyers， with some increasing the rates 5 to 10 percent above the benchmark rate.

　　Diversifying Ownership

　　PetroChina， China’s top oil and gas producer， announced on May 12 it will use part of its pipeline business to form a new company， which will then be sold as part of its mixed-ownership drive.

　　The new company will be based on assets and liabilities concerning the west-east gas pipeline managed by its pipeline subsidiary and all shares will be transferred after its establishment， according to a PetroChina announcement filed with the Shanghai Stock Exchange.

　　Total assets involved are estimated at over 82 billion yuan ($13 billion)， with total liabilities of around 53 billion yuan ($8.42 billion) and net assets at 29 billion yuan ($4.61 billion)， the announcement said.

　　PetroChina said the move will improve its distribution of resources and financing structure， as well as boost its mixed-ownership progress.

　　The new firm， which could possibly be called East Pipeline Co.， will be established in Shanghai with registered capital at 10 billion yuan ($1.6 billion).

　　Customs Reform

　　China’s General Administration of Customs (GAC) announced on May 14 that it will launch customs clearance reform in Beijing and Tianjin on July 1， which will be expanded to neighboring Hebei Province from October.

　　The GAC said the reform will unify customs clearance in Beijing， Tianjin and Hebei， through sharing a new information system of customs declaration， risk control， data checks and site work.

　　The reform will also cover sectors like supervision on tariff-free zones， cracking down on smuggling， business management and inspection， the GAC said.

　　The administration said the reform will make customs clearance more convenient in the area and local enterprises will be able to use the customs office of any of the three locations.

　　The reform will be promoted in other areas like the Yangtze River Delta and Pearl River Delta with faster economic development and frequent customs clearance， according to the GAC.

　　Narrowing Income Gap

　　The State Council said on May 14 that it has approved the establishment of an inter-ministry joint conference mechanism to coordinate income distribution reform.

　　The mechanism， led by the National Development and Reform Commission (NDRC)， includes the ministries of education， science and technology， public security， civil affairs， finance， human resources and social security， according to a statement on the website of the Central Government.

　　Other ministries or departments in charge of land and resources， taxation， housing， state-owned assets supervision and administration are also members of the regime.

　　The joint conference， chaired by head of the NDRC， will be tasked with coordinating all work in deepening income distribution reform， such as in conducting policy studies， making policies and reform plans， and coordinating ministries involved in the reform.

　　The joint conference should monitor， track， assess and review the process of the reform before reporting to the State Council.

　　Its establishment is widely seen as a boost to the reform which is complicated and involves a wide range of government departments.

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