The government's series of policies to rein in runaway home prices in major cities last year has had little effect. This year, amid the global financial turmoil, the government revised its property market guidelines and adopted several measures to prop up the real estate market after detecting home price declines in some cities.

Domestic retail sales-up 22 percent

Domestic retail sales maintained a robust growth of 22 percent year on year in October, boosted by the National Day Holiday week (September 29-October 5) and an after-holiday effect.

NBS figures indicated that retailers sold more than 1 trillion yuan ($147 billion) worth of goods in October, or 8.8 trillion yuan ($1.3 trillion) in the first 10 months. Oil and related industries reported the biggest year-on-year growth of 39.7 percent among all sectors. Moreover, domestic sales of jewelry rose a dramatic 31 percent as consumers turned to gold as an investment rather than bank deposits.

Sales of building and home improvement materials fell 14.8 percent in October year on year due to the sluggish property market. Consumer spending on communication devices also fell 7 percent.

Paid-in FDI-up 35 percent

Figures from the Ministry of Commerce indicate that China received paid-in foreign direct investment (FDI) of $81.1 billion in the first 10 months, an increase of 35 percent year on year.

But the number of newly established foreign-invested companies stood at 22,736, down 26.24 percent from the same period last year.

Energy Dilemma

China's power firms are encountering stiff headwinds in the second half of the year, partly due to falling demand resulting from the economic slowdown.

In the beginning of the year, China was hungering for power, and power companies worked intensively to maintain sufficient supplies. At that time, power companies desperately needed coal to produce electricity.

But in less than a year, the situation has reversed. Major power firms suffered heavy losses in the first nine months. Huadian Power International Corp. posted a net loss of 1.37 billion yuan ($201 million) against a profit of 984 million yuan ($144 million) a year earlier. Huaneng Power International Inc. lost 2.2 billion yuan ($322 million) in the third quarter, while losses at Datang International Power Generation Co. Ltd. reached 433 million yuan ($64 million).

Lots of factories were shut down in the aftermath of U.S. financial market debacle, thus leading to less demand for electricity. Power producers complained of insufficient demand and hoped to raise electricity prices again to make up for their losses.

Zhu Hongren, an official at the Ministry of Industry and Information Technology, told Xinhua News Agency that the expansion of the financial crisis, excessive production and shrinking demand would become more critical issues.

Massive VAT Reform

The government vowed to reduce companies' tax burden by more than 120 billion yuan ($17.6 billion) starting on January 1.

The domestic value-added tax (VAT) reform program will shift from the existing production-based VAT system to a consumption-based VAT system that will let companies receive tax deductions on fixed-asset expenditures.

It also will reduce the VAT rate for small businesses to a universal 3 percent from 6 percent for industrial firms and to 4 percent for commercial companies. The reform program also scraps policies that exempted imported equipment from VAT. The new reform program will end the tax rebates on domestic equipment purchases that foreign-funded companies currently receive, putting them on equal footing with local companies.

The reform is expected to encourage Chinese companies to upgrade their technology, boost domestic demand and push for industrial restructuring, according to the State Council. It is part of an overall government stimulus package of 4 trillion yuan ($586 billion) to be spent by the end of 2010.