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Economic planner: China to adopt tight monetary policy

2007-12-04 05:16

From:xinhua Article type:Reproduced

BEIJING, Dec. 3 (Xinhua) -- China Development and Reform Commission Minister Ma Kai said over the weekend that the country will adopt a tight monetary policy while continuing a prudent fiscal policy.

Ma made the remarks at the first high-profile economic dialog between China and Japan held Saturday in Beijing.

Observers here said over the past few years, China had adhered to a moderately tight monetary policy. This time, Ma, head of the country's top economic planning agency, took off the word "moderately."

Also at the Sino-Japanese economic dialog, Finance Minister Xie Xuren said China would make use of various monetary instruments to intensify credit control.

China's central bank has this year raised the reserve-requirement ratio for commercial banks nine times and interest rates five times.

Observers reckoned a sixth rate hike for the year was around the corner.

China has paid growing attention to the mounting inflationary pressure after the country's consumer price index (CPI) recorded a10-year-high rise of 6.5 percent in October.

In addition, the Political Bureau of the Central Committee of the Communist Party of China convened a meeting last week and said next year's top macroeconomic priorities would be in preventing the economy from overheating and the current price increases from evolving into "evident inflation."

The observers believed China would continue to face high inflationary pressure next year. In international markets, oil prices would continue their exposure to high volatility and grain prices would keep rising.

In the domestic market, high food prices would likely give rise to the price of labor and then the production cost in different sectors.

Yu Yongding at the research institute of world economy and politics under the Chinese Academy of Social Sciences said that four percent was the CPI ceiling that China could tolerate. If the inflation indicator increased higher it would send a signal to the central bank that a tight monetary policy was necessary.

Zhuang Jian, chief economist of the Asian Development Bank in China, said the monetary policy had played an important role in China's macroeconomic control and it would be indispensable for the country's future economic regulation.

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