(Bloomberg, Nov 30, 2006) China shouldn't ease curbs on real estate development because high profit margins in the industry have made local governments keen to invest in more property projects, researchers from the country's top planning body said.

The government should redouble efforts to prevent an investment rebound in real estate and to limit property price increases, researchers lead by Wang Xiaoguang from the National Development and Reform Commission, said in a research note published in the China Securities Journal.

Profit margins for real estate developers are as high as 30 percent, which could encourage further expansion and foil the government's efforts to rein in surging economic growth, the researchers said.

China's government brought about an investment slowdown mainly through administrative curbs such as controlling land use and lending, and making project approvals harder to come by. Fixed-asset investment in towns and cities climbed 26.8 percent in the first 10 months from a year earlier, after rising 28.2 percent through September, the statistics bureau said on Nov. 16.

China has this year raised interest rates twice and ordered banks to set aside more money as reserves three times to rein in surging investment that fuels the economic boom.

The country's banking regulator will require real estate developers to use their own cash to cover at least 35 percent of the financing for their projects, the Journal reported on Nov. 14, citing a China Minsheng Banking Corp. employee it didn't identify.

(China Securities Journal, 11-30, p.A15) For newspaper's Web site: http://www.cs.com.cn

Source:Bloomberg