China should phase out policies aimed at boosting exports and drawing foreign investment because strong inflows of foreign currency are roiling the economy, a top economic official on Saturday was quoted as saying. "Indiscriminate support of exports and foreign capital influx has created short-term economic problems," Guo Shuqing, who is said to be stepping down as China's foreign exchange chief, was quoted as saying.
Such policies had fuelled "excessive speculation" in China's property market and also made the coastal areas far richer than inland regions, the China Daily quoted Guo as saying.
Among other preferential policies, China offers exporters tax rebates and taxes foreign-invested businesses at lower rates than most domestic companies.
Analysts say speculators have poured foreign cash into China, particularly its property sector, in hopes of turning a quick profit if authorities let the yuan currency rise in value against the dollar.
"We should gradually reduce the preferential treatment to exports and seriously review our foreign investment policy," Guo said, adding that China's fast export growth was not sustainable and that a trade surplus was not always a good thing.
China's exports rose more than 35 percent in 2004, helping to create a trade surplus of $32 billion, while foreign investment rose about 15 percent to nearly $61 billion.
Earlier this week, Guo reportedly quit as director of the State Administration of Foreign Exchange (SAFE), which oversees China's massive $610 billion forex reserves, after being picked last week to become chairman of scandal-hit China Construction Bank.
The government has not confirmed his departure from SAFE, and the China Daily did not say if he had left that post.