6:00AM New York, 6:00PM Hong Kong – Taxpayers in Hong Kong will receive HK$40 billion in refunds in the next budgetary cycle. Hong Kong stocks fell after sharp drop in Shanghai and worries related to large public offerings.

Market Sentiment

In Hong Kong trading the Hang Seng Index plummeted 0.2% or 35.90 at 23,269.14, and the China Enterprises index of H shares, or Hong Kong listed shares in mainland companies, declined 1%, or 133.91, to 13,202.98.

Daily turnover on main-board was the lowest since the beginning of this year at HK$63.7 billion compared to HK$73.9 billion on Friday last week

HK to announce HK$110 billion Budget Surplus

The Standard reported today citing its sister paper The Sing Tao Daily that Hong Kong Financial Secretary John Tsang Chun-wah will announce in Wednesday’s 2 008/09 budget taxpayers will be handed back HK$40 billion.

A further HK$30 billion will be extended towards boosting government expenditure in social welfare, medical services and infrastructure, while duties on beer and wine will de reduced.

The report noted that the government will announce a surplus of HK$110 billion. Taxpayers will receive 75% tax rebate, capped at HK$25,000, though this will only be available when taxes for 2007/08 are paid early in 2009.

Tax bands will be increased from HK$35,000 to HK$40,000 and the standard tax rate will be lowered from to 15% from 16%.

China Inflation to Rise to 6.8%

The People’s Daily Online reported today that Goldman Sachs chief China economist Liang Hong observed in a report that the rapid growth in money supply in China will ultimately increase this year’s inflation from 4.5% forecasted earlier to 6.8%.

Goldman Sachs also raised its inflation forecast for next year from 2.5% to 3%, adding that higher inflation will add pressure to the faster appreciation of the local currency, which is expected to appreciate 12% in the coming 12 months.

People’s Bank of China recently said M2, which covers cash in circulation including all deposits, rose 2.22% higher than December at 18.94% at the end of January.

China to maintain tight monetary policy

Xinhua News Agency reported today that China’s central bank deputy governor Yi Gang said at a seminar on the Chinese economy held at Beijing University on Sunday that the primary risk to the economy is in inflation and the government will maintain its grip on the economy through a tight monetary policy.

Gang added that the tight monetary policy meant that the annual increment of China’s M2 money supply will decline 16% in 2008 while bank loans will remain at 16% as in 2007.


China’s Economy to grow 10% in Q1

The People’s Daily Online further reported today that 14 research institutions, including the State Information Centre, the research center of Chinese economy under the Beijing University, and the research center of China and world economy under the Qinghua University, projected that China’s first quarter will be 10.4% to 10.5%. In addition, consumer price index will increase between 6.8% and 7.1% in the same period.

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