1970-01-01 08:33:27
China may consider taking further steps to cool the economy by raising interest rates or the amount banks must keep in reserve, central bank Governor Zhou Xiaochuan said in Shanghai yesterday.
Addressing the closing session of the African Development Bank's annual meeting, Zhou said China could use a broad array of policy tightening tools if necessary. But he did not specify when further actions might be taken.
Interest rates have already been raised three times in just over a year as part of a long-running campaign to cool an economy that has grown by double digits for four straight years.
In the last rate hike, the benchmark rate for one-year loans rose from 6.12 percent to 6.39 percent on March 18. The one-year deposit rate increased from 2.52 percent to 2.79 percent.
The authorities have also raised commercial banks' reserve ratios seven times since June 2006 to slow lending.
"We don't exclude any possibility to make further use of monetary instruments, including reserve requirements, open market operations, interest rates or other instruments," Zhou said.
Inflation in China gained three percent in April, after it accelerated to 3.3 percent in March, the highest rate in more than two years.
"Macroeconomic stability is very important for China, and it also has possible impact on the global economy," Zhou said. "As always, we will try to work out sound monetary and fiscal policy."
The central government is trying to prevent excess cash from a record trade surplus from stoking inflation, fueling wasteful investment and creating more bad loans.
Economic growth accelerated to 11.1 percent in the first quarter from 10.4 percent in the previous three months, driven by a trade surplus that almost doubled to US$46.4 billion. Banks made 1.4 trillion yuan (US$180 billion) worth of new loans in the first quarter, nearly half the total for all of last year.
Zhou also reiterated China's long-term desire to gradually move to a more flexible foreign exchange regime, a move that would appease other nations that believe the currency is undervalued, giving Chinese exports an advantage.
"I am sure the Chinese exchange rate will become more and more flexible, which means it will be more reflective of market supply and demand," Zhou said.
The ADB annual meeting hosted by Shanghai was the first time it was held in Asia and only the second time outside Africa.
China is encouraging corporate investment in Africa, especially by small and medium-size private companies.
Source:Shanghai Daily