Economic Policy News
- Nation shifts to tighter monetary policy
Date: 6-Dec-2007 Sources: (Shenzhen Daily)
THE government signaled a shift in its monetary policy yesterday, saying it would abandon a decade-long 'prudent?policy for a 'tight?one with an eye to controlling growth and keeping inflation in check.
The change, reached at an annual economic planning conference of top leaders that closed yesterday, signifies a heightened sense of urgency about preventing the world's fourth-largest economy from overheating.
The economic priorities for 2008 call for monetary policy to play a greater role in controlling the economy so as to focus on the tasks of preventing overheating and acute inflation, Xinhua said.
The conference said with prudent fiscal policy and tight monetary policy, China would take 'two prevents?as its premier macro-control task in the coming year: to prevent economic growth evolving from rapid to overheating, and to prevent price hike shifting from a structural one to evident inflation.
'It's more of a shift in the mentality among decision makers,'said Dong Tao, Credit Suisse's chief China economist.
'China's credit policy and interest rate policy are shifting gears to a little bit more of a tightening bias.'
The central bank subsequently released its own statement on how it would implement the meeting's conclusions.
'We will take forceful measures to enforce liquidity management and to further improve the yuan's exchange rate formation mechanism,'the People's Bank of China said on its Web site.
The central bank pledged to work towards a better balance of international payments and would seek to promote 'good but rapid?growth.
The comments on the yuan reflect the government's long-held position that it will gradually allow the currency to become more flexible.
The government would also 'strictly control?the pace of loan growth and the overall volume of loans, Xinhua said. Fiscal policy would remain 'prudent,'it said.(
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