China may stop issuing special bonds used to spur growth, the official China Securities Journal said on Monday, as the country now tries to curb overheating.
"The fiscal policy could face some adjustments next year, the bond issue could be stopped next year," the newspaper said, citing Chinese experts at a high-level financial forum.
China may also reconsider a reform of the value-added tax system in the north-eastern rust-belt provinces under which the tax would be changed from one based on production to consumption, the newspaper said. It did not elaborate.
A Finance Ministry spokesman declined to comment on the report, saying only that any decision on issuing Special Construction Bonds for 2005 would be made early next year.
China has kept an expansionary fiscal policy since 1998, after taking a hit from the Asian economic crisis, issuing a total of 800 billion yuan ($97 billion) in special bonds by 2003 to spur growth by building infrastructure projects.
The government has cut the amount of such bonds by 20 percent this year to 110 billion yuan and pledged to spend more on addressing the widening rich-poor gap.
Government officials have pledged to phase out the stimulus policy eventually, but they have not given a timetable.
"Under normal circumstances, the government won't halt such bond issuance all at once," said Jia Kang, director of the Finance Ministry's institute of fiscal science.
"It won't be halted unless there is an exceptionally urgent situation," he told Reuters, adding the government may continue issuing a smaller amount of bonds next year to sustain unfinished public projects.
China, struggling to rein in an economy which grew 9.8 percent in the year through the first quarter, has taken a series of tightening measures, including raising bank reserve requirements three times and curbing credit to sectors like property, steel and cement.
Some economists say power shortages, skyrocketing property investment and rising prices point to unsustainable growth.
The central bank has pledged to keep monetary policy as tight as necessary and has so far avoided raising rates. But economists say inflationary pressure could eventually lead to the first interest rate hike in nine years.
Zhang Liqun, an economist at the cabinet's Development Research Centre think-tank, was quoted by state media as urging the government not to resort to raising rates.
"I believe it's no longer appropriate to unveil measures like raising interest rates and taxes," Zhang said in an article published on the Securities Journal's Web site: www.cs.com.cn.
"But reforms of the tax, investment and financial systems should be accelerated."
The government's tightening measures, coupled with easing steel prices and expected slowing of price rises in the housing and auto sectors, could help cool investment growth, Zhang said.
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