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for formulating and tweaking macroeconomicpolicies. Lackluster exportsand weak investment in the real estatesector resulted in the industrial addedvalue rate growing by 9.3% in April, thelowest in the past three years.Despite the government’s efforts to promoteeconomic restructuring and expanddomestic consumption, fixed asset investmentremains a key driver of the economy.Year-on-year growth of fixed asset investmentcontinued its slide down to 20.2%in the first four months of this year, downfrom 25.8% last May, due to a significantdecline in real estate investments.In November 2011, yoy growth in realestate investments fell below 30% forthe first time, and continued sliding tothe current 18.7%. Consequently, if thegovernment is to stop the real economyfrom shrinking, future real estate investmentpolicies will play a crucial role inthe country’s economic health.When the financial crisis hit in 2008,the government launched the RMB 4trillion economic stimulus package,RMB 280 billion of which was investedin affordable housing projects. Marketwatchers reckon the government mightneed to introduce similar stimulusmeasures unless things turn around.Loosening monetary policiesTo stimulate economic growth, thegovernment will need to relax its monetarypolicies. The recent move to reducebanks’ reserve ratio is a direct response,which is expected to thaw RMB400 billion.To boost confidence and stimulatedomestic consumption, the CentralGovernment might also speed up financialreforms, such as introducing businesstax concessions and accelerating taxreforms to lower production costs. PremierWen Jiabao also said recently thata backup plan needs to be put in placeto prevent the economy from slowingfurther.However, loose monetary policiesand an influx of capital from Europeand the U.S. could easily lead to a floodof liquidity. Professor Sun Lijian, Instituteof World Economy, Fudan University,wrote recently that an increase inliquidity has to be in step with the developmentof the financial system.Loose monetary environments inEurope, the U.S. and Japan will also posechallenges to China’s capital managementand its exchange rate flexibility. Consequently,monetary policies are expectedto remain prudent for a while until economicreadjustment and financial developmentpolicies start to bear fruit.Financial institutions believe the possibilityof an interest rate cut is low, butthey do not rule out that the reserverequirement ratio could be further loweredin the coming months.China’s slowing economy has easedinflationary pressures. In April, the CPIyoy growth rate was 3.4%, down from3.6% in March, which seemed to easethe central bank’s worry about inflationaryinstability.Subscribe NowA pre-paid annual subscription to The Bulletin costs HK$360 posted toany Hong Kong address and US$85 airmail to any address in the world❏ YES! I wish to subscribe to The Bulletin for❏ 1 year (12 issues) ______(Total amount) ❏ 2 years (24 issues) ______(Total amount) ❏ 3 years (36 issues) ______(Total amount)Name:_______________________________________________Company:___________________________________________________________________Address:_________________________________________________________________________________________________________________________Postcode:_______________Tel No:____________________ Fax No:_____________________ Email:_____________________________________________I wish to pay by: ❏ Cheque or Bank Draft in the case of overseas subscription (made payable to The Hong Kong General Chamber of Commerce)❏ MasterCard ❏ Visa (Hong Kong dollars for local subscriptions and US$ for overseas subscriptions)Card No:________________________________________ Expiry Date:____________ Signature:(For Office use: Authorised Code:___________________ Date:_________________ )_____________________The Bulletin The Bulletin 工 商 月 工 刊 商 February 月 刊 June 2012 27Please return this form to: The Hong Kong General Chamber of Commerce, 22nd Floor, United Centre, 95 Queensway, Hong Kong Tel: 2529 9229 Fax: 2527 9843