Beijing said the new stimulus package will benefit 7.5 million low-income urban families and 2.4 million households located in the more remote countryside.

China pumped $387.5 billion into real estate development over the first 11 months of the year, up 22.7% from the same period in 2007. However, residential sales fell 18.8% year-over-year, despite the investment.

Beijing is now trying to reignite the once red-hot real estate sector by implementing the following reforms:

• Owners who have owned their home for two or more years can now sell it without paying business taxes.
• Owners previously had to wait five years before selling their home tax-free.
• Owners who have owned their home for less than two years will now only be required pay taxes on their profit, not the total sales price. The tax rate of 5% remains the same.
• People with “smaller-than-average” apartments can now buy a second apartment under more favorable loan terms, with size limits being set on a region-by-region basis.

Financial institutions are also being encouraged by Beijing to make more funds available for mergers and acquisitions among property developers.

The new regulations are temporary, valid for only one year, and their effects aren’t likely to be seen until the second half of 2009.  Still, they are expected to work in concert with other measures to stabilize the real estate market and help maintain a high level of broad economic growth.

Previous measures earlier this year included cutting mortgage rates, taxes, and down payments for first-time home buyers.

“Recent measures taken by the nation to boost domestic consumption and revive economic growth have had a positive impact on the real estate market as transaction volumes have rebounded,” the State Council said in a statement. “We need to take more forceful measures to ensure investment in real estate and its healthy development.”Sales volumes increased in November from the previous month in cities including Beijing, Shanghai and Shenzhen.

The government also recently unveiled a $585 billion (4 trillion yuan) stimulus package that to boost investment in infrastructure projects, such as water and energy projects, airports, disaster relief, and $ new railroads over the next two years.

Source: China Unveils Plan to Bolster Real Estate, Ensure Growth

However, the Financial Times reports that the country’s export links to emerging markets are likely to shield it from the worst effects of the global recession:

Exports, which have been a big driver of growth in Japan’s economic recovery, have been surprisingly resilient in the face of a slowdown in the US, one of its main trading partners, thanks to demand from China, the Middle East and other emerging regions.

The IMF supported the Bank of Japan’s recent decisions to keep interest rates on hold in the face of a slowing economy, and praised the bank for its ‘flexible’ approach to meeting liquidity needs in the money markets.

“Concentrate on Japanese companies that are already working closely with China,” says Keith Fitz-Gerald in Money Morning. “The companies in this category firmly understand the regional dynamics at play today. But, more importantly, they understand just what the future is going to look like, and are already preparing for business dealings with China – and the Chinese consumer.

“Some great choices if you want to cash in include solar-ceramics maker Kyocera Corp. (ADR: KYO), trading giant and independent power plant developer Mitsui & Co. Ltd. (ADR: MITSY), and even Toyota Motor Co. (ADR: TM), which is now the world’s No. 1 automaker, and (as Money Morning just reported) also has branched out into commercial jetliners.”

Martin Hutchinson, also in Money Morning, says: “There are two categories of beneficiaries from a trading relationship between China and Japan that’s closer and more-barrier free. The first group consists chiefly of Japanese high-tech companies that are able to take advantage of China’s lower labor costs and more-profitably attack the world markets.

“The second group consists of low-cost, China-based manufacturing companies that can sell to Japan as a particularly juicy nearby market with similar cultural and taste characteristics – unlike the unfamiliar west.

“Both types of companies are likely to be big long-term winners from this trend.”