The Chinese yuan, also known as the renminbi, is already convertible under the current account - the broadest measure of trade in goods and services. However, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing because of worries about abrupt capital flows.
Record price paid for site in Beijing
A prime residential site in Beijing yesterday became the most expensive site in the capital in terms of floor area, three days after Premier Wen Jiabao reaffirmed that cooling measures would continue.
Sinobo Group, a private local developer, won the Haidian site in a land auction with the 46th bid of 2.63 billion yuan (HK$3.21 billion), or 33,831 yuan per square metre. This surpassed the previous record for a residential site, in Shunyi district, which sold for 29,859 yuan per square metre in 2009.
The developer's offer included allocating 16,400 square metres of floor area for subsidised housing. Excluding this area, David Zhang, a director of research at Centaline China in Beijing, estimated the land price was 41,500 yuan per square metre, making it the most expensive residential site in the country.
'The premier's speech had limited impact on the auction or the property market, as the government did not launch any new cooling measures,' Zhang said.
The local government has introduced subsidised housing requirements in an attempt to lower land prices.
Raymond Wang, a director at DTZ in Beijing, said bidding on the site was aggressive since it is in a good location. Longfor Properties, Overseas Chinese Town and Sunac China Holdings joined the auction.
'The land supply in the 4th Ring Road area is very tight. Prices of nearby housing estates range between 60,000 and 70,000 yuan per square metre. Developers are optimistic about property prices in the area.'
Poly Real Estate Group withdrew from the tender in response to the People's Daily and Xinhua issuing reports urging state-owned enterprises not to bid. The record-breaking deal will stimulate the property market, which goes against the central government's policy.
Zhang said the transaction would boost property prices in the area by 5 to 10 per cent, but the impact on the city as a whole would be limited.
Wang believes the winning bidder will have to sell flats there for 80,000 yuan per square metre to generate a reasonable profit.