TO THE POINT: Shrugging off the quake's negative impact, the Chinese property market maintained growth in May, though it was no longer robust. Not only are property prices slowing down, but also fixed-asset investments. July may see even tighter monetary controls as rebuilding after the quake spurs demands. But for Taiwan, July means the beginning of a new era as it will be officially opened to mainland tourists on July 18. By HU YUE

Property Boom Cools

China's property continued its rosy path in May, but has shown signs of tapering off.

Property prices in China's 70 large and medium-sized cities grew 9.2 percent year on year in May, 0.9 percentage points lower than in April, according to the National Development and Reform Commission (NDRC).

The prices of new residential properties climbed 10.2 percent year on year in May, down 0.6 percentage points from April.

Non-residential property prices gained 6.5 percent, 0.4 percentage points slower over April.

Analysts say rental and sales prices are on course to embrace a modest rise in the third quarter. More importantly, an escalating number of property refunds and discounts in the market are coming to light. Property developers are pondering how to allure buyers, who are sticking to a wait-and-see attitude.

As the Chinese Government further tightens its monetary grip, property developers are feeling a chill. Besides this, fears are also bubbling that foreign property investors may flee from China so as to offset their losses caused by the subprime mortgage meltdown with their gains in China. That would further depress the flimsy confidence of Chinese buyers.

However, analysts say that key property markets such as Beijing and Shanghai will continue to ride an upward tide in the remainder of this year, but by a slimmer margin.

Investing Spree

China's urban investment in fixed assets gained a dizzying 25.6-percent growth to 4.03 trillion yuan ($575.2 billion) in the first five months of 2008 over the same period a year earlier, according to the National Bureau of Statistics (NBS).

It was 0.3 percentage points slower over the same period last year, and 0.1 percentage point below the January-April period this year.

"The growth largely came in line with market expectations and reflected the government's efforts to tame the overheating economy," Hu Yanni, a CITIC Securities researcher told Xinhua News Agency.

Hu said the devastating earthquake would make a mild dent on fixed-asset investment in the short term. But in the long run, investment will bulge on the back of buoyant demand for infrastructure rebuilding and temporary settlement construction in the disaster-racked regions.

Li Daokui, professor of Tsinghua University echoed Hu's opinion, cautioning that the investment pick-up may exacerbate China's inflationary concerns.

Financial Wrangle

The fourth round of China-U.S. Strategic Economic Dialogue was wrapped up with a bunch of cooperation agreements. But behind the rapprochement, financial tussles had been roaring between the two economic heavyweights.

According to a report in The Financial Times, the United States has recently held back approval of banking licenses for China's two biggest banks because of concerns over the role of China's sovereign wealth fund-China Investment Corp. (CIC). CIC is the parent of the Central Huijin Investment Co. Ltd.-the largest shareholder of the two banks.

Industrial and Commercial Bank of China, China's largest bank by assets, has been striving for more than a year to set up branch operations in the United States. China Construction Bank, the country's second largest by assets, put in its application in February.

Meanwhile, China also declined the bids of the U.S. Citibank and Morgan Stanley to set up joint venture security firms in China.

As a matter of fact, the two Chinese banks have held to independent operations, said Zhang Guoqing, a researcher with the Chinese Academy of Social Sciences. However, the United States is poorly acquainted with their operation systems, added Zhang.

The U.S. investment environment is yet to head off the shadow of the subprime mortgage crisis, which can add to our bargaining power, Zhang said.

China should also tighten supervision over CIC and increase its transparency, Yi Xianrong, a renowned economic expert pointed out.

Alarm Bell From Viet Nam

The overwhelming financial crisis that swept through Southeast Asia 10 years ago seems to rear its ugly head again. In Viet Nam, one of the Southeast Asian emerging economies, a simmering financial unrest is taking its toll.

Recent years saw Viet Nam's overheating economy spiral out of control. Global cost surges also heightened its inflationary jitters. Its consumer price index (CPI), a barometer for inflation, skyrocketed to a staggering 25.2 percent in May.

At the same time, its property market has also shown signs of crashing, with property prices in Ho Chi Minh City diving 50 percent. The massive downturn has so far sliced nearly 60 percent off the peak of its stocks.

Worries are therefore growing that the shockwaves may reverberate through into China, which is closely connected with Viet Nam by economy.

However, a report by Goldman Sachs pointed out that its infectious impact on China would hardly be felt.

The report said the root cause of the turbulence was inflation, which is also saddling China. But thanks to a tightening monetary stance, China has effectively held uncontrollable inflation at bay. Besides this, blessed with abundant foreign exchange reserves and fiscal surplus, China is well positioned to prevent similar fallouts.

Compared to China, Viet Nam, in financial distress, seems less capable of handling the turmoil. Its trade deficit of the first five months this year added up to $14.4 billion, $2 billion more than the whole of 2007. By March 2007, the country had registered measly foreign exchange reserves of $18.5 billion.

But the panic may spill out to surrounding Southeast Asian countries, which are also ailed by inflationary challenges and shaky economic fundamentals, said the report.

The report also cautioned that China should further maintain a vigilant eye on torrent inflows of speculative hot money, which add to uncertainties hanging over the country's financial stability.

Currency Crosses Straits

Taiwan finally gets a chance to carve a slice of the big Chinese tourism pie.

The mainland's Association for Relations Across the Taiwan Straits and the Taiwan-based Straits Exchange Foundation signed an agreement on June 13 that opens the island's door to mainland tourists.

The pact, taking effect on June 20, set a quota for the number of tourists in line with Taiwan's accommodation capacity. A maximum of 3,000 mainland tourists can travel to Taiwan every day, the agreement said.

Mainland residents in Beijing, Tianjin, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Hubei, Guangdong, Chongqing, Yunnan and Shaanxi could apply for tours to the island.

Analysts say this move would pump into the island economy, which has in recent years been struggling on the edge of recession.

Taiwan would rake in around 19 billion yuan ($2.7 billion) of revenue for receiving around 1.1 million tourists annually, according to island officials. Besides this, the opening up would create over 40,000 jobs on the island every year.

Natural and cultural landscapes of Taiwan have a considerable appeal to mainland tourists, such as the Ali Shan Mountain, the Jihyueh Tan Lake and the Taipei Palace Museum.

According to Taiwan's industry insiders, mainland tourists are even stronger in consumption abilities than those from Japan or South Korea.

It is predicted that the island's annual growth rate of gross domestic product could add 0.15 to 0.2 percentage points afterwards.

Numbers of the Week

16.2 billion yuan

Online Chinese shoppers spent 16.2 billion yuan ($2.3 billion) in 19 major cities in the first half of 2008, China Internet Network Information Center (CNNIC) announced on June 16.

6.8919

The Chinese currency, the yuan, was trading at 6.8919 to $1 on June 17, hitting a record high since the yuan was unpegged from the U.S. dollar in 2005. By June 17, the yuan had appreciated 17.67 percent since then.