China Maps out Economic Plan to Promote Sustainable Growth A decade of soaring economic growth has made China the world’s factory, a major exporter and one of the most-attractive consumer markets. Yet the huge investment boom has also left the country with a production capacity glut and idle factories. China, which has surged to become the world’s fourth-largest economy, is facing major challenges such as excessive liquidity, high energy use, a widening trade gap and a stock market that many analysts say is overvalued. China’s legislature, the National People’s Congress, called for a lower growth target this week at its annual session in Beijing. To achieve that goal, top policy makers proposed several new measures to soothe concerns over the rapid economy. Wider trading band Central bank Governor Zhou Xiaochuan said on Monday that a wider trading band for the yuan may be on the horizon, a development that would surely please Western nations that charge the country is setting the value of its currency artificially low to promote exports. “It’s possible that China will gradually widen the movement of the currency,” Zhou said. The Chinese currency has advanced 6.4 percent since July 2005, when the central bank scrapped its peg of 8.28 yuan to the greenback and weighed it against a basket of currencies. China allows a daily 0.3 percent trading fluctuation from a central parity rate. The central bank calculates the rate based on average weighed quotes from 10-plus commercial banks that serve as market makers to provide advice on the yuan’s expected movement. Economists say a stronger yuan would help settle China’s huge trade surplus, which swelled 74 percent to US $177.5 billion last year. The country aims to achieve a balance between its imports and exports by 2010 as it boosts domestic demand and promote overseas sales of energy-intensive products. Futures in the future Fan Fuchun, vice chairman at the China Securities Regulatory Commission, said on Sunday that pilot stock-index futures may be launched in the first half of this year to help investors head risks and to deal with growing market volatility. The comment came after the previously planned January debut was delayed due to regulatory concerns over a weak market base. The long-discussed launch of futures contracts designed to track a gauge covering the top 300 Chinese mainland-listed firms would allow investors to profit even when the index falls. Overseas financial giants including UBS and AG have applied to join the first group of investors to trade in index futures. The benchmark Shanghai Composite Index, which more than doubled last year, has experienced wider volatility amid profit taking in the past couple months. Red chips coming The Shanghai Stock Exchange said on Monday it plans to create a top-notch blue-chip market this year as it bolsters the quality of listings and lures more funds into the market. The exchange will attempt to attract share sales from firms that are the backbone of the economy. These enterprises include Hong Kong-incorporated Chinese mainland firms, or red chips, which will be allowed for the first time to list in Shanghai by the end of this year. Several heavyweight red chips such as PetroChina and China Mobile are traded on the Hong Kong bourse. Fewer small plants China has banned electricity companies from building coal-fired power plants with less than 300 megawatts of generating capacity to reduce energy consumption and pollution. Phasing out smaller plants—the major cause for the energy waste and emissions in the electricity industry—will help generators adjust the structure of power units by replacing high-energy-consuming capacity with more high-efficient units, analysts said.