Economic Policy News
- More tightening steps expected
Date: 10-Jan-2007 Sources: (Shenzhen Daily)
THE government will introduce a package of tightening measures this year, including likely rises in required reserves and interest rates, to ensure the economy cools without triggering a hard landing, a government think tank said in a report published yesterday.
Steps already taken to mop up excess cash in the financial system had only had a limited impact, suggesting the need for more tightening measures in 2007, the official China Securities Journal cited the State Information Center as saying.
China took its latest aim at flush liquidity conditions Friday by raising the amount of cash that lenders must hold in reserve for the fourth time since June.
The move followed two rises in benchmark interest rates last year, part of a long-running campaign to quell the source of a credit-fuelled investment boom which has raised fears of a boom-bust scenario.
'Strengthening management of liquidity conditions will be a main economic task in 2007,'said the think tank, which comes under the auspices of the National Development and Reform Commission (NDRC), the nation's top economic planner.
China would continue to adjust interest rates and banks' required reserves, it said.
Interest-rate adjustments would be a more effective way to tap the brakes on an economy set to register its fourth consecutive year of double-digit growth in 2006, according to remarks made by Chen Dongqi, vice president of the Academy of Macroeconomic Research, another NDRC-affiliated think tank.
'China should fine-tune interest rates in a way that is similar to the adjustments made to required reserves,'Chen wrote in an editorial, adding that interest-rate levels in China remained too low.
The State Information Center outlined Chinese efforts to improve the nation's international balance of payments position as another priority this year.
This will be achieved through management of the yuan, the center said, without elaborating.
Chen, who believes export growth will remain strong this year, said the government would do more to cut export tax rebates and discourage exports of low-end products as a way of trimming its trade surpluses.
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