China Says It Will Tighten Monetary Policy in 2008, Exert Greater Control Over Lending.
China will shift its monetary policy "from prudent to tight" in 2008, state media said Wednesday, to prevent its already hot economy from overheating and to try to contain accelerating inflation that threatens social stability.
Xinhua News Agency said the decision was made at a closed-door economic conference, which the country's Communist Party leaders hold every December to draft policy for the coming year. It said the conference decided to "strictly control the volume and granting pace of loans so as to better regulate domestic demand and balance international payments."
Chinese authorities have raised interest rates and taken other measures to try to curb lending and slow investment in shopping malls, factories and office buildings. Beijing worries that a glut of unneeded projects could lead to defaults on bank loans, causing a debt crisis.
The meeting of the Central Economic Work Conference also highlights the balancing act that Chinese leaders need to perform as they seek to cool inflation and excess investment without stifling the growth needed to lift millions from poverty.
China's sizzling economy is expected to grow by 11.5 percent this year, with a government think tank recently predicting just a marginal slowing next year to about 10.8 percent. The consumer price index, meanwhile, hit 6.5 percent in October, tying the highest rate in a decade, and well above the government's target of 3 percent. Real estate and stock prices have also soared. The Shanghai stock market's main index, which has fallen back some this month, is still up 88.5 percent this year.
Xinhua said with prudent fiscal policy and tight monetary policy, China aimed to accomplish "two prevents" next year: "To prevent economic growth evolving from rapid to overheating, and prevent price hikes shifting from a structural one to evident inflation." President Hu Jintao and Premier Wen Jiabao both delivered speeches at the three-day conference that ended Wednesday.
To cool lending, the central bank has hiked interest rates five times this year, bringing the benchmark rate on one-year loans to the current 7.29 percent. It has also raised banks' reserve requirements -- reducing the amount available for lending -- eight times this year.
The central bank issued a statement Wednesday saying it would "continue to strengthen and improve the economic control, further implement tight monetary policy, (and) take forceable measures to strengthen the management of liquidity."
The State Information Center, a research institute under China's economic planning agency, the National Development and Reform Commission, forecast an inflation rate for 2008 of 4.5 percent, just slightly below its 4.7 percent estimate for 2007.
It also said China's global overall trade surplus would continue to grow, hitting US$328.4 billion (euro223 billion) in 2008, up 22.5 percent from its forecast for this year's trade gap of US$268 billion (euro182 billion), which would be 51 percent higher than the gap last year.
China will shift its monetary policy "from prudent to tight" in 2008, state media said Wednesday, to prevent its already hot economy from overheating and to try to contain accelerating inflation that threatens social stability.
Xinhua News Agency said the decision was made at a closed-door economic conference, which the country's Communist Party leaders hold every December to draft policy for the coming year. It said the conference decided to "strictly control the volume and granting pace of loans so as to better regulate domestic demand and balance international payments."
Chinese authorities have raised interest rates and taken other measures to try to curb lending and slow investment in shopping malls, factories and office buildings. Beijing worries that a glut of unneeded projects could lead to defaults on bank loans, causing a debt crisis.
The meeting of the Central Economic Work Conference also highlights the balancing act that Chinese leaders need to perform as they seek to cool inflation and excess investment without stifling the growth needed to lift millions from poverty.
China's sizzling economy is expected to grow by 11.5 percent this year, with a government think tank recently predicting just a marginal slowing next year to about 10.8 percent. The consumer price index, meanwhile, hit 6.5 percent in October, tying the highest rate in a decade, and well above the government's target of 3 percent. Real estate and stock prices have also soared. The Shanghai stock market's main index, which has fallen back some this month, is still up 88.5 percent this year.
Xinhua said with prudent fiscal policy and tight monetary policy, China aimed to accomplish "two prevents" next year: "To prevent economic growth evolving from rapid to overheating, and prevent price hikes shifting from a structural one to evident inflation." President Hu Jintao and Premier Wen Jiabao both delivered speeches at the three-day conference that ended Wednesday.
To cool lending, the central bank has hiked interest rates five times this year, bringing the benchmark rate on one-year loans to the current 7.29 percent. It has also raised banks' reserve requirements -- reducing the amount available for lending -- eight times this year.
The central bank issued a statement Wednesday saying it would "continue to strengthen and improve the economic control, further implement tight monetary policy, (and) take forceable measures to strengthen the management of liquidity."
The State Information Center, a research institute under China's economic planning agency, the National Development and Reform Commission, forecast an inflation rate for 2008 of 4.5 percent, just slightly below its 4.7 percent estimate for 2007.
It also said China's global overall trade surplus would continue to grow, hitting US$328.4 billion (euro223 billion) in 2008, up 22.5 percent from its forecast for this year's trade gap of US$268 billion (euro182 billion), which would be 51 percent higher than the gap last year.
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