Economic Policy News
- Govt. urged to better use interest rates
Date: 26-Apr-2007 Sources: (Shenzhen Daily)
THE government needs to make more use of price-based monetary tools such as interest rates to steer the economy, a central banker said in remarks published yesterday.
In the past 12 months, the central bank has increased banks' reserve requirements six times and interest rates three times.
It also regularly sells central bank bills to drain excess liquidity created when, in an effort to keep the yuan's value from rising too quickly, it buys U.S. dollars flowing into the country from the trade surplus and foreign direct investment.
Xiang Junbo, deputy governor of the People's Bank of China, was quoted by the Shanghai-based Oriental Morning Post as saying that those sterilization operations were still working.
'But we need to consider using more price instruments such as raising interest rates,'the paper quoted Xiang as saying.
Many analysts expect another interest rate rise to come sometime soon, after China reported annual economic growth of 11.1 percent in the first quarter and beyond-target 3.3 percent consumer inflation in March.
Xiang said China's international payment imbalance has now surpassed economic growth and employment to become the government's top priority.
'The combination of international payment imbalances and excessive liquidity together have become the two biggest obstacles in financial and macroeconomic controls,'he said.
Xiang also repeated a long-held official refrain that the resolution of the two problems hinges on structural adjustments in trade and economic growth.
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