TO THE POINT: Local governments at all levels in China are taking efforts to curb soaring home prices, with Beijing introducing the strictest policies. On observing the increase of international crude oil prices, China raised gas prices for the first time this year. Foreign direct investment in China continued to expand in January and will remain high in 2011. Hot money, on the other hand, accounted for a small amount of capital inflows. Huawei Technology withdrew from its acquisition of the U.S. 3Leaf Systems and the Chinese Government has requested transparency in the U.S. approval procedure. Baidu, the biggest search engine in China, is facing a lawsuit for allegedly blocking competitor's search results.

By LIU YUNYUN

Reining in Property

Dozens of Chinese cities, led by Beijing, adopted tougher-than-ever property restriction measures to curb the skyrocketing home prices.

On February 16, Beijing announced 15 measures to cool the housing market, which is the strictest among all cities. Basically, the new rule requires that non-Beijing residents must have paid their monthly social security contribution or income tax for five consecutive years before they are eligible to buy their first apartment in the city, while people with Beijing hukou, or permanent residence registration, will be limited to two properties.

Beijing's high real estate prices have caused huge complaints from the city's dwellers for years. Wealthy speculators who buy several pieces of real estate for investment purposes are the major reason why the prices haven't stopped their skyward trajectory.

Home prices in some major cities such as Beijing have more than doubled during the past two years. Property prices in 70 large and medium-sized cities rose 6.4 percent in December 2010 compared with the same month in 2009. In January, among the 70 large and medium-sized cities, 68 saw their property prices rise over the same month last year, and 10 of them witnessed a growth rate of over 10 percent, according to the National Bureau of Statistics.

As of February 21, a total of 14 cities have released the local package of rules on home purchase restrictions, all requiring local household registration status.

To further wipe out the cause of soaring home prices, the Central Government ordered more than 20 central state-owned enterprises (central SOEs), whose core business is not property, to fully exit the real estate market this year. Altogether, 14 central SOEs already exited the market in 2010.

In spite of the good intentions, people questioned the fairness in home purchases. Some argued that including hukou in the home purchase is a discrimination against non-hukou holders. Others worry once the government finds out its revenue shrinks substantially without the property trading taxes, it might ease the rules again, triggering a new surge in property prices.

Higher Gas Price

The National Development and Reform Commission (NDRC) raised the prices of gasoline and diesel by 350 yuan ($53.2) per ton effective on February 20.

The adjustment was the first hike this year but the second one in the past two months. The benchmark retail price of gasoline was increased by 0.26 yuan ($0.04) per liter and diesel by 0.3 yuan ($0.045) per liter.

The statement on the NDRC website said the increase was in line with international oil price fluctuations, but the timing was "properly postponed" and that the hike was "limited," meaning the oil prices should have been higher than the adjustment.

Liu Zhenqiu, Deputy Director of the Department of Price of the NDRC, said that the government would continue to provide subsidies to low-income families, farmers, taxi drivers and other sectors that could be hurt by the price adjustment.

Rising FDI

The foreign direct investment (FDI) in January increased 23.4 percent year on year to $10.03 billion, said the Ministry of Commerce (MOFCOM), which expects the FDI will continue robust growth in 2011.

Analysts said China's strong economic growth and the transformation of the economy led by domestic consumption will help to sustain China's appeal to foreign investors.

The 23.4-percent increase in January was higher than the growth rate of 15.6 percent in December 2010. Last year, foreign investment grew by 17.4 percent year on year to a record $106 billion.

Hot Money Inflow

China witnessed a "hot money" inflow of $35.5 billion in 2010, accounting for a relatively small part of the increase in foreign exchange reserves, the State Administration of Foreign Exchange (SAFE) said in a report published on February 17.

This is the first time that China announced an official estimation of "hot money" to the public.

The figure accounted for 7.6 percent of the increase in foreign exchange reserves from 2009, SAFE said.

"The continuous capital inflows were mainly attracted by stable and rapid economic growth in China," SAFE said.

"That's a very small amount (compared to China's huge economy) and proved what we have been saying, that speculative cross-border inflows have a very limited impact on the economy," Wang Tao, chief China economist at the UBS Investment Bank, told China Daily.

Huawei Retreats

Chinese telecom equipment giant Huawei Technology Co. Ltd. scrapped its efforts to acquire the U.S. server firm 3Leaf Systems as a U.S. security panel refused to approve the deal.

Yao Jian, spokesman for MOFCOM, said the United States should make the approval process for Chinese enterprises seeking to invest in the United States more transparent.

Citing "security concerns," the U.S. Government rejected several previous bids by Chinese companies to acquire U.S. firms, such as Huawei's attempt to purchase U.S. technology firm 3Com in 2008, and Northwest Nonferrous International Investment Co.'s bid for mining company First Gold in 2009.

After Huawei's withdrawal, MOFCOM issued a statement saying "in recent years, some relevant parties in the United States have used various reasons, such as national security, to hamper Chinese firms' normal trade and investment activities in the United States," adding "such obstructions have already had an impact on the China-U.S. economic and trade relations."

According to rankings released by the World Intellectual Property Organization on February 11, Huawei ranked fourth in terms of patent application in the world. Analysts say that business acquisitions are quite common among global hi-tech and intellectual property giants.

Wu Yixin, a researcher with the Shenzhen Academy of Social Sciences, said the United States overacted and its stubborn stance would hamper normal business transactions between China and the United States.

Baidu in Trouble

Even before Google.cn moved its mainland search operation to Hong Kong last year due to censorship concerns, the NASDAQ-listed Baidu.com had been the biggest search engine on the Chinese mainland. Its dominant position was enhanced after Google's retreat.

However, the search engine behemoth may now face anti-monopoly scrutiny as a Chinese website, Hudong.com, an online encyclopedia, alleged that Baidu unfairly blocked its service.

On February 22, Hudong.com filed a complaint with the State Administration for Industry and Commerce (SAIC), requiring an investigation into Baidu and that the administration impose a fine of up to 790 million yuan ($120 million), or 10 percent of Baidu's annual revenue in 2010.

Hudong has its reasons. Its CEO Pan Haidong claimed his company's search results have always ranked first in other engines such as Google.com.hk, and Sogou.com.

It is uncertain how the SAIC may react to Hudong's complaint. The industry watchdog seems to have no worries as it has rejected three complaints against Baidu concerning monopolistic behavior since 2008.

According to figures from the research company Analysys International, Baidu's market share in China surged to 75.5 percent in the fourth quarter of 2010, while that of Google declined to 19.6 percent.

More investors are eyeing Baidu's lion's share in the search market and want a slice of the pie. Xinhua News Agency and China Mobile jointly launched an Internet search engine on February 22, known as

Panguso.com. It is expected to provide news, websites, images, videos and audio data for users and its service will also be present on mobile phones. Whether the green hand can pose a challenge to the dominant Baidu remains unclear.