The People's Bank of China governor, Zhou Xiaochuan, also reiterated that policymakers would carry out a "prudent monetary policy" in 2011 -- signalling further interest rate hikes and other tightening measures could be on the way.

Zhou's comments come after President Hu Jintao visited low-income families in the capital on Wednesday and promised the government would do more to help needy people, amid growing concerns over the country's widening wealth gap.

"The government will attach great importance to affordable housing projects and will carefully supervise the quality of these projects and improve nearby public facilities," the China Daily quoted Hu as saying.

Last weekend, Premier Wen Jiabao spoke on live radio to reassure listeners that the government would be able to tackle inflation and house prices that have risen out of the reach of many ordinary Chinese.

Wen said Sunday he understood that recent price rises had "actually made life even more difficult for people on low and medium incomes".

But he stressed that thanks to government intervention, "we are fully able to control the general level of prices" and said he was confident that housing prices would come back down to a "reasonable level".

The premier's message came one day after the central bank hiked interest rates for the second time in less than three months.

Ever fearful of inflation's historical potential to spark social unrest, top leaders have been pulling on a variety of levers to rein in consumer prices and tame runaway house prices.

On Thursday, China ordered local officials to fine property developers who have left land vacant for more than one year amid a crack down on hoarding that has been blamed for driving up real estate values.

The central bank has also ordered lenders to keep more money in reserve, effectively limiting the amount of funds they can lend.

The government meanwhile has pledged to ensure adequate supply of key food and fuel products, crack down on food and property speculators and boost assistance for the needy.

Zhou's comments on Friday came as the central bank set the strongest yuan exchange rate against the dollar since vowing to loosen its grip on the currency in June.

The People's Bank of China set the yuan central parity rate -- the middle of the currency's allowed trading band -- at 6.6227 to the dollar, meaning it has appreciated about three percent against the greenback since June 19.

The gradual appreciation in the yuan benefits the world's second-largest economy by reducing import costs and easing inflationary pressures, according to Sheng Songcheng, director of the PBOC's Statistics and Analysis Department.

Sheng made the remarks in the central bank-backed Financial News on Thursday.

earlier related report
China orders state-owned firms to pay more money to Beijing
Beijing (AFP) Dec 31, 2010 - China has ordered major state-owned companies to divert more of their profits to the central government, giving Beijing more money to spend on priorities such as education, healthcare and the military.

The finance ministry announced the increase in dividend payments on Thursday as Beijing seeks to improve social services and boost domestic consumption in order to reduce the country's heavy reliance on exports to drive growth.

It is also seeking to narrow the country's widening wealth gap.

The central government owns many of the country's major companies such as Sinopec, Asia's largest refiner, and China Mobile, the world's biggest mobile operator by subscribers.

These companies have raked in enormous profits in recent years due to booming economic growth and protection from the government against their private-sector rivals.

Starting next year, companies mainly in the tobacco, energy and telecoms industries will have to pay 15 percent of their after-tax profits to the central government, up from 10 percent currently, the finance ministry said.

Companies in the next group, mainly in the steel, transport and construction sectors, will see their dividend payout ratios increase to 10 percent from five percent, the statement said.

The smallest dividends will be paid by companies mainly in the weapons and heavy machinery sectors, such as China National Nuclear Corporation and China Aerospace Science and Technology Corporation.

They will have to turn over five percent of their profits, it said.

China Grain Reserves Corporation and China National Cotton Reserves Corporation will not be required to pay dividends, the statement said.

The increase has been approved by the State Council, or cabinet.

China resumed collecting dividends from state-owned companies in 2007 after suspending payments in the 1990s during massive restructuring and mass layoffs in the sector.

Beijing collected 157.22 billion yuan (23.8 billion dollars) in dividends from 2007 to 2009, state media reports said previously.

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