China Stocks Fall on Tightening Concerns Before Economic Data

Dec. 30 （Bloomberg） -- China’s stocks fell, led by financial companies and commodity producers, on concerns the government’s tightening policies may slow economic growth.

China Vanke Co. and Poly Real Estate Group Co. slid more than 1 percent after state television reported the government will crack down on speculative investment in the real-estate market. Jiangxi Copper Co. and Aluminum Corp. of China Ltd., the biggest producers of copper and aluminum, dropped before the release of manufacturing data that will show whether the economy is withstanding two interest-rate increases since October.

“Investors are sitting on the sidelines, expecting better buying opportunities in January when liquidity increases and banks loosen lending,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “There may be some technical rebound from the excessive declines but it won’t be too much.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 9.8, or 0.4 percent, to 2,741.68 at 9:42 a.m. The CSI 300 Index slid 0.4 percent to 3,050.64.

The benchmark measure has slumped 16 percent in 2010, making it the worst performer in Asia. The government has ordered banks to set aside more reserves six times this year and boosted interest rates twice to tame inflation and curb asset bubbles after record gains in lending and property prices. China reported inflation of 5.1 percent in November, the highest in more than two years and exceeding the previous month’s 4.4 percent.

HSBC Holdings Plc and Markit Economics will release a purchasing managers’ index, an indicator of manufacturing growth, at 10:30 a.m. It was 55.3 in November. The data are seasonally adjusted and a reading above 50 indicates an expansion.

China will “resolutely” enhance property measures and curb excessive price gains in 2011, the official Xinhua news agency reported yesterday, citing Housing Minister Jiang Weixin.

The nation plans to increase its housing supply in 2011 and the government is preparing more macro control policies, Xinhua reported.

China needs to stabilize commodity prices, boost employment and maintain social stability, Xinhua also reported yesterday, citing Chinese President Hu Jintao.

Chinese academic Guo Tianyong said the country has room to raise interest rates once or twice in the first half of 2011, according to a transcript of his speech published in the Financial News newspaper today. Guo is head of the China Banking Research Center at the Central University of Finance and Economics.

--Irene Shen. Editor: Allen Wan