China will continue to pursue a sound monetary policy, which
will be more closely linked to its industry, taxation and foreign
exchange policies, a top central bank official said yesterday.
"In order to maintain stable and healthy national economic
growth, we will continue to stick to a sound monetary policy," Su
Ning, deputy governor of the People's Bank of China, said
yesterday.
"And we will seek more and effective coordination with industry,
taxation and foreign exchange policies when drafting our monetary
policies," the deputy central bank governor said, without
elaborating.
The central bank would continue, as it did before, to employ a
host of measures to curb expansive money supply and credit
growth.
The measures may include open market operations, as well as
interest rate and bank reserve ratio adjustment, Su told the
BusinessWeek CEO Forum in Beijing.
The central bank has so far raised the interest rate twice and
bank reserve ratio deposits that commercial banks are required to
make with the central bank once this year in a bid to cool the
sizzling economy.
Su said that macroeconomic tightening measures had already
succeeded in reining in red-hot economic growth.
The Chinese economy grew 10.9 percent in the first half of this
year, with this growth slowing to 10.4 percent in the third
quarter.
But the economy still faces several challenges if it is to
maintain robust yet healthy growth, Su said, pointing to slumping
consumption, the soaring trade surplus and escalating fixed-assets
investment.
The overall proportion of consumer spending in the national
economy has been on a downward spiral for some time, which may pose
problems for economic development, Su told the forum.
The proportion, Su said, has slid from 62 percent in the 1980s
to 52 percent last year.
Problems related to the international balance of payments remain
serious, with the foreign trade surplus continuing to soar this
year, he said.
And the risk still remains that fixed-assets investment, which
is "still bigger than it should be," may rebound again, as local
governments and enterprises continue to invest more money in
projects, the deputy central bank governor said.
China's fixed-assets investment grew by a spectacular 29.8
percent in the first half of this year and increased 27.3 percent
in the first nine months of 2006.
The central bank, Su said, will put expanding domestic
consumption high on its policy agenda.
The bank will also work to improve the credit structure, Su
said.
(China Daily November 3, 2006)