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| Prudent Monetary, Fiscal Policies for 2007 |
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China will maintain its prudent monetary and fiscal policies next year in the face of anticipated vigorous investment, excessive bank loans and an expanding trade surplus. Two senior officials disclosed the trends of China's macro-economic policies for next year at the 2007 China Industrial Development Forum at the weekend. China would continue its prudent fiscal policy and reduce its deficits slightly next year, said Vice Minister of Finance Lou Jiwei, adding that the reduction would be small as more funds would be channeled to education, health and rural development. A continued prudent monetary policy will maintain the continuity and stability of macro-control policies, Su Ning, vice governor of the People's Bank of China (PBC), said. China's gross domestic product grew by 10.7 percent in the first nine months of this year. Fixed asset investment was up 27.3 percent, 1.2 percentage points higher than the increase recorded during the same period last year. New bank loans totaled 2.76 trillion yuan (US$349 billion) in the first nine months, overshooting the planned annual quota of 2.5 trillion yuan (US$316 billion). Meanwhile, the trade surplus reached US$109.85 billion, compared with US$101.88 billion for 2005. "High bank savings and low consumption have become one of the main problems for China's economy, directly causing fixed asset investment to race ahead," Su said, adding that the proportion of consumption to the national economy had dropped 10 percentage points in the last decade while that of savings continued to climb. Su said the government deposits in the central bank had reached a record high and about 500 billion yuan (US$62.5 billion) would be withdrawn by the end of the year. Its injection to the market would increase money supply and lead to a rise in bank loans, in which case the PBC would take measures to control such possible loan increases, Su added. China tightened fiscal policy two years ago in the hope of capping galloping fixed asset investments and preventing a possible overheating of the economy. As investment kept soaring in the first three quarters, some analysts suggested that China tighten money supply to help strengthen macro-economic control. "What we should do now is to strictly carry out the macro-economic control policies and keep them stable," said Zhu Zhixin, vice minister of the National Development and Reform Commission, who also appealed for more active domestic demand. Next year, Zhu said, the government would continue its macro-economic control measures to prevent a rebound while encouraging investment in education, science and rural development. More capital will also be channeled to environmentally friendly construction to facilitate economic restructuring, Zhu added. (Xinhua News Agency November 6, 2006) |
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