The central bank said on Friday that it will continue to adopt a
"moderately tight" monetary policy in the coming months to keep the
economy on the right track.
On the whole, the economy is sound, but "still faces prominent
problems such as excessive investment growth, too large a trade
surplus and too much lending", the People's Bank of China said in a
statement on its website after a quarterly meeting of its monetary
policy committee.
Moreover, problems such as continually rising inflation and
asset prices have also surfaced, the statement said.
China's consumer price index surged to a decade high of 6.5
percent in August and its gross domestic product expanded
year-on-year by a blistering 11.9 percent in the second
quarter.
The central bank set a target of 3 percent for CPI growth early
this year, although it has altered its stance as the situation has
changed.
One of its research arms said in a report released on Friday
that it expects inflation to reach 4.6 percent this year.
But inflation should ease to about 5 percent in the first half
of next year, according to the report cited by the China
Securities Journal.
It forecast the country's GDP will grow by 11.6 percent in 2007
and slow down to 10.8 percent in the first half of next year.
"The economy risks becoming overheated in terms of some
indicators," Zhao Xijun, a finance professor at Renmin University
of China, told China Daily.
A central bank quarterly survey of 20,000 Chinese households in
50 cities last month showed most people expected inflation to rise
further in the fourth quarter.
The central bank did not say in its statement how it will
implement its "moderately tight" policies, but some experts have
suggested it raise the interest rate further to keep it in line
with rising inflation.
The central bank will closely study different factors that
caused recent inflation and asset price rises and will take
"targeted" measures, according to the statement.
It has raised interest rates five times and commercial banks'
required reserves seven times so far this year to mop up excessive
liquidity.
Whether another interest rate hike will become a reality depends
on a number of factors, said Zhao.
"There are some uncertainties, although it is possible."
If the US economy is further trapped in the crisis triggered by
its current credit crunch and its consumption slows down, it may
affect China's exports, which will lower the possibility of another
interest rate hike this year on the Chinese side, he said.
Moreover, China's tightening measures in the first half of this
year may gradually start to work in the coming months. If that
happens and inflation is stabilized, another hike will not come, he
said.
(China Daily September 29, 2007)
