BEIJING, China - Chinese Premier Wen Jiabao has vowed that a recent interest rate cut aimed at stimulating economic growth will not ignite a new bout of real estate speculation that would push up housing costs, state media said Sunday.
Wen, China's top economic official, ordered local officials on Saturday to enforce rules aimed at cooling a surge in housing prices, the official Xinhua News Agency reported. Wen said during an inspection tour of the eastern city of Changzhou that people who try to evade the curbs should be punished.
Wen also called for faster construction of affordable housing, saying that local authorities should facilitate the approval of land and improve the quality of construction by inviting all types of investors to participate in projects, Xinhua said.
Wen said regulation of the market is still at a "critical moment" and described the task as "tough," it said. The measures to control the market include limits on home purchases and high down payments to qualify for mortgages.
On Thursday, China's central bank cut the interest rate on one-year loans by 0.31 percentage points to 6 per cent. It said banks will be allowed to offer discounts to borrowers of up to 30 per cent below that benchmark, an increase from the 20 per cent discount previously allowed.
The interest rate cut was the second in a month as the government tries to reverse the deepest economic slump since the 2008 global crisis. But it also wants to control surging housing costs that have fueled political tensions. The rise in real estate prices was driven in part by a large amount of government stimulus spending and bank lending pumped into the economy after the 2008 crisis.
The controls have helped push prices slightly lower over the past year but remain near record-high levels. A nine-month decline ended in June, when the average home price in 100 major cities rose 0.05 per cent from a month earlier, Xinhua reported, citing data from the China Index Academy.
In an unusual step, Thursday's interest rate announcement called on banks to control mortgage lending. That suggested authorities are worried about a possible resurgence in real estate speculation as they try to stimulate industrial activity and job creation.
The slowdown in the world's second-largest economy raises the risk of job losses and unrest at a politically awkward time for the ruling Communist Party. It is trying to enforce calm ahead of a once-a-decade handover of power to younger leaders.