The governor of China’s central bank, Zhou Xiaochuan, declined to rule out the possibility of further interest rate hikes to check inflation and cool down the stock market, the Economy Daily reported. Zhou has raised interest rates twice this year, but these moves have had little effect on the burgeoning economy. The benchmark one-year borrowing and deposit rates now stand at 6.57% and 3.06% respectively. Fixed asset investment in urban areas surged 26% in the first five months of the year to US$420 billion (RMB3.2 trillion, while the consumer price index surpassed the bank’s 3% target to peak at 3.4%, fuelled largely by rising prices for staple foods. Meanwhile, the benchmark Shanghai Composite Index slid 3.7% to a two-week low 3,941 points Monday, while the smaller Shenzhen index lost 5.1% to 1,127 points. Former US Fed chairman Alan Greenspan said China’s bullish stock market was not sustainable and a drastic contraction would happen someday.

The National People’s Congress – China’s top legislature – has for the second time reviewed a draft of a proposed anti-monopoly law, China Today reported. Under the proposed law, foreign purchases of Chinese firms or foreign investment in any other form must first be examined for their effect on national security. Statistics show foreign acquisitions and mergers accounted for around 20% of China’s total foreign direct investment in 2005, up from 5% before 2004 and11% in 2004. The draft was proposed after a number of foreign firms began purchasing domestic firms, including large state-owned enterprises, in recent years.

Foreign firms will be entitled to tax rebates on any disabled Chinese employees from 2008, China Today reported. The tax rebate will be capped at RMB35,000 per disabled person per year, and disabled employees will not have to pay income tax. Where disabled employees make up 25% or more of the total workforce, the company will get rebates on both income and value-added taxes. Those with less than 25% disabled employees will only get income tax rebates. Statistics show China has 83 million disabled people, 22.7 million of whom are employed and 8.6 million officially unemployed.

A recent government spot check of MP3 players found only one-third met acceptable standards. But as China Business News reports, the testing raised hackles among those affected because neither the industry nor the government has as yet developed and released standards.