A report produced by the State Information Center predicts that China will fulfill the transformation of its tight monetary policy in 2008. The exchange rate and interest rate policies will play a big role in this process.
The report claims that China's 2008 monetary policies will confront four big challenges: a rocky transmission mechanism; independence constrained by the international capital flow; cost-push inflation; shock brought to the micro-control targets by the rapid development of the fictitious economy. Therefore, experts predict that price tools such as raising interest rates and accelerating RMB appreciation will play a leading role in 2008.
The report suggests that the Central Bank shall change its current single interest raising pattern and rearrange its interest raising methods, levels and timing in line with the country's economic development. China's monetary policy shall be made according to internal economic development without being affected by interest rates spread between the US dollar and the RMB. The Central Bank will increase the transparency of monetary policies. Additionally, the monetary policy shall keep in mind the operation of the fictitious economy and increase its guiding capacity in restructuring.
For more details, please read the full story in Chinese. (http://www.cs.com.cn/sylm/04/200712/t20071210_1258075.htm)
(China.org.cn December 10, 2007)
