Numbers of the Week

562.2 billion yuan

Newly extended renminbi loans totaled 562.2 billion yuan ($88.82 billion) in November, an increase of 7.8 billion yuan ($1.23 billion) from the previous year, said the People's Bank of China.

383.6 billion kwh

China's electricity consumption grew 9.91 percent year on year to reach 383.6 billion kilowatt hours in November, said the National Energy Administration.

TO THE POINT: China has initiated the trial program of Renminbi Qualified Foreign Institutional Investors, making a solid step to boost wider use of the Chinese currency. Home price declines spread to more Chinese cities as the tightening measures gained traction. China trimmed its holdings of U.S. Treasury securities by $14.2 billion in October. In a report by Deloitte Touche Tohmatsu Ltd., the accounting firm expects China to remain a manufacturing powerhouse over the next few years, though pressures are already mounting.

Kick-Starting RQFII

China has recently released rules for the Renminbi Qualified Foreign Institutional Investors (RQFII) pilot program, allowing offshore yuan funds to invest in domestic securities markets.

Hong Kong subsidiaries of qualified fund management companies and securities firms can use yuan funds raised in Hong Kong to invest in mainland securities within a permitted quota, according to the rules jointly issued by the China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange.

The total investment quota of RQFII is set at around 20 billion yuan ($3.15 billion). To control risks, qualified investors should invest no less than 80 percent of the yuan funds in fixed-income securities, while investment in stocks and equity funds should account for no more than 20 percent.

"The move is expected to widen the investment channel of overseas renminbi funds and speed up internationalization of the Chinese currency," said Li Daxiao, Director of the Beijing-based Yingda Securities Research Institute.

As an effort to expand the global presence of the yuan, China has encouraged use of the yuan in cross-border trade settlement and investment. In October, the country allowed foreign investors to make direct investments in China with the yuan obtained legally overseas.

Housing Downturn

The real estate market continues to lose strength as reflected by nationwide home price declines.

In November 49 out of 70 monitored major cities reported month-on-month drops in prices of new residences, up from 34 in October, according to the National Bureau of Statistics.

Meanwhile, only five cities experienced price increases, compared with 16 in the previousmonth. Prices stayed unchanged in 16 cities.

As for second-hand homes, prices fell in 51 cities in November, increasing from 38 in October. Only seven cities saw their prices increase.

At the recently concluded Central Economic Work Conference, policymakers pledged to bring home prices back to a reasonable level. Many cities including Beijing have announced to continue with purchase restrictions in 2012.

Meanwhile, property developers have felt the pinch of market gloom as their sales plunged. Sales of China Vanke Co. Ltd., the nation's largest developer by market value, nose-dived 36 percent year on year to reach 8.29 billion yuan ($1.31 billion) in November, the lowest in seven months.

In a recent report Credit Suisse predicted China's house prices will decline 20 percent from their 2011 peak through the end of 2012, with transactions of the remainder of the period to be subdued.

"The economy would have to worsen significantly to force a loosening of policy towards the property sector. In such an event, underlying conditions would likely be so bad at that point that any boost to homebuyer confidence would be limited," it added.

Shedding U.S. Assets

China reduced its holdings in U.S. Treasury securities by $14.2 billion in October, said the U.S. Treasury Department.

China retained its position as the largest foreign holder of U.S. Treasury securities, with $1.1341 trillion in its portfolio. Japan, the second largest foreign holder, increased its holdings by $22.2 billion to a record high of $979 billion.

Concerns have been growing about the safety of the dollar assets given the indebtedness of the federal government and weakness of its economy. For the first time in history, Standard & Poor's in August lowered the rating on the U.S. sovereign debt from AAA to AA+.

But analysts believe U.S. government debt could still be highly valued in terms of volume and liquidity, especially at a time when European counties are still struggling with a debt crisis.

"The U.S. Treasury securities would remain a good option for China as the country's foreign exchange reserve swells," said Song Hong, a researcher from the Institute of World Economics and Politics under the Chinese Academy of Social Sciences.

"Many sectors in real economies of Western countries have been closed to Chinese investors," he added.

Manufacturing Machine

China will remain dominant in the manufacturing industry in Asia over the next three to five years, though challenges remain, said a report of the accountancy firm Deloitte Touche Tohmatsu Ltd.

However, the industry still faces many challenges including tax burdens, intellectual property rights and the need to improve internal operational ability, said the report.

In 2010, China replaced the United States to boast the world's largest manufacturing sector, with output value of $1.995 trillion, accounting for 19.8 percent of the global total, according to data from the consulting firm IHS Global Insight.

"The main driving forces of the competitiveness of China's manufacturing industry are the abundant labor resources, the quality of infrastructure and the Chinese Government's continuous and well-planned support for technology research," said Rosa Yang, national leader of manufacturing industry at Deloitte China.

Based on interviews with senior executives from 150 large and medium-sized Chinese manufacturing companies, the report found that more than half of the executives surveyed considered the burden of taxation the biggest difficulty in operating their business.

China currently ranks 31st on the tax burden list among the documented 209 countries and regions around the world, Deloitte reported, citing data from the World Bank.

"At present, China's manufacturing industry is attempting to shift to the high end of the global value chain, in which enterprises need to make huge investments for technological innovation and market exploration.

An excessive tax burden would affect corporate income from these two areas and their development," said Po Hou, a partner in strategy and operations practice at Deloitte China.

Shoring Up Kashgar

The Kashgar Research Institute for Strategic Development (KRISD) was established on December 15 in Beijing, extending a helping hand to the development of Kashgar, an emerging city in Xinjiang Uygur Autonomous Region.

The State Council launched a program in May 2010 to develop Kashgar as a special economic zone and designed favorable tax and land policies to propel the city as an export hub toward the Middle East and Europe.

The KRISD can extend heavy support to Kashgar's economy by focusing on research about government policies and industry innovation, as well as consulting and international cooperation.