China's top legislature on Saturday adopted a law amendment to raise the country's individual income tax threshold from 1,600 yuan a month to 2,000 yuan.

The individual income tax threshold increase was believed to relieve the economic burden of medium- and low-income earners amidthe recent price increase of some goods.

The amendment will go into effect as of March 1, 2008.

Raising the threshold of individual income tax collection from 1,600 yuan to 2,000 yuan means a reduction of 30 billion yuan in state revenue a year, according to official statistics.

However, the rise in personal income tax collection threshold will free 70 percent of income earners from paying income tax. The current threshold of 1,600 yuan makes 50 percent of income earners free from paying the tax.

China's consumer price index climbed 6.9 percent in November, marking the fourth consecutive month the index had been above six percent. Price increases for various goods have already placed a burden on common families.

Yuan Rises to Strongest Since Dollar Peg Ended in 2005

China's Renminbi (RMB) climbed 54 basis points to break the 7.33 mark on Tuesday, with the central parity rate at 7.3261 yuan against one US dollar, according to the Chinese Foreign Exchange Trading System.

The yuan broke the 7.34 mark at 7.3315 yuan against one US dollar on Monday 24, December 2007. This was the 80th new high the yuan has hit since the beginning of this year, up more than 6.6 percent accumulatively.

The accumulative appreciation since July 21, 2005, when China discontinued yuan's peg to the greenback, has exceeded 10.7 percent.

The yuan would still maintain a slow and stable appreciation trend, according to a report by Tuesday's China Securities Journal.

The weak performance of the US dollar in the international market last Friday also gave a spur to the yuan's appreciation, said the report.

"Tight" Monetary Policy for 2008

China adopted a "tight" monetary policy for the first time in 10 years. China's consumer price index, the barometer for inflation, rose to 6.9 percent, a record high in recent years. Facing mounting inflationary pressure, the Central Economic Work Conference listed "preventing the rapidly expanding economy from overheating and structural price rises from evolving into entrenched inflation" as the top priorities for macro control.

The People's Bank of China raised the benchmark interest rates six times this year. The central bank also raised the banks' reserve requirement ratio 10 times in the year to a record high of 14.5 percent. Such frequent changes have rarely been seen in China's history.

China has taken a series of measures to cool off the economy, including increasing interest rates, encouraging domestic consumption, and better managing the property and stock markets.

Related News:

Policy shift pushes up yuan   Jan 03 , 2008

Yuan rises to 7.2775 against dollar  Jan 03 , 2008

Concern over tightening policy limits share gains   Jan 02, 2008

China to Raise Individual Income Tax Threshold  Dec 24, 2007

Interest rate hikes won't quell appetite for real estate Dec 22, 2007

Beijing Sees Record Individual Income Tax in March April 07, 2007

Central bank reiterates 'tight' monetary policy         Dec 29, 2007

China lets yuan appreciate a bit faster                        Dec 29, 2007