Economic Policy News
- Policy tools eyed to prevent overheating
Date: 12-Feb-2007 Sources: (Shenzhen Daily)
CENTRAL bank governor Zhou Xiaochuan said Friday that a variety of policy tools would be used to prevent economic overheating with growth surging and inflation on the rise.
'Monetary deposits, exchange rates and interest rate policy, all of these are necessary for economic adjustments,'Zhou said on the sidelines of a meeting of the Group of Seven industrial countries, which China was also invited to attend.
China's economy, the world's fourth largest, grew by 10.7 percent in 2006, its fastest in more than a decade, as investments and exports powered ahead despite a series of government curbs to check the pace of expansion.
But Zhou did not specify a growth target when asked if China was aiming for a more moderate GDP rise this year of 8 percent, a level the People's Bank of China stated as a policy goal in its fourth-quarter monetary report issued earlier Friday.
'We hope to slow down but whether we can get to 8 percent, I am not certain,'he said.
Eight percent is seen by analysts as the minimum expansion needed to create enough jobs for China's huge labor pool without causing overheating.
The central bank is also carefully monitoring consumer prices, which rose sharply in December, though it is not overly worried by inflation, he said.
'It's still not very significant. There might be some seasonal reasons, so we are going to follow statistical data developments very closely,'he said.
China's inflation jumped to an annual rate of 2.8 percent in December, the most in almost two years and much higher than market expectations. This has fuelled belief that the central bank may take tightening steps, potentially including faster yuan appreciation.
Zhou, asked whether the yuan had been rising too quickly in recent weeks, said he is generally satisfied with the currency's appreciation.
'According to our plans and our economic ability, we are increasing our yuan exchange rate flexibility, and I think this is now suitable,'he said.
China abandoned a decade-old dollar peg in July 2005. The yuan has gained almost 5 percent against the dollar on top of the 2.1 percent revaluation that accompanied the depegging.
China is under heavy pressure from the United States to do more. Washington and Europe believe the yuan is undervalued, giving China an unfair trade advantage. Chinese officials, however, say the economy needs more time to develop its market mechanisms before the currency can trade freely.
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