1970-01-01 08:33:27
The Monetary Policy Commission of the People's Bank of China (PBOC) has stressed the importance of cautious credit and investment growth at a regular meeting to discuss the country's macro-economic situation.
A statement from the PBOC said the commission advises the central bank to pursue a prudent monetary policy but tighten money supply "moderately" to keep the economy stable.
It said the country's monetary policies need to be coordinated with fiscal, industrial and trade policies as well as financial supervision.
"The country's economic situation is positive overall but there are problems," said the statements, citing structural problems, the imbalance in international payments and the heavy and wasteful consumption of energy and resources that have accompanied fast growth.
Stephen Roach, an economist with Morgan Stanley, agreed that the Chinese economy was "in excellent shape" but the structure of the economy remained unbalanced, uncoordinated, unstable and unsustainable.
He said China should shift its emphasis from investment and trade to private consumption and improve social security, pensions, unemployment insurance, medicare and education.
"The government are doing the right thing. But the question is: Are they doing enough? And are they doing it fast enough?" he said.
Answering a question about inflation, Roach said he was worried more about asset inflation than consumer prices inflation.
"Domestically you have too much liquidity, some of which comes from overseas investors. If capital accounts are closed, that money is trapped.It will seep into the real economy or the financial economy. That is the sort of inflation that worries me," he said.
To absorb liquidity, the central bank raised deposit reserve ratios five times and interest rates twice this year. By June 21, more than 2.5 trillion yuan of central bank bonds had been issued to banks and financial institutes.
China's top legislature on June 29 authorized the Ministry of Finance to issue 1.55 trillion yuan of special treasury bonds to purchase foreign exchange, and also approved the raising of the ceiling on treasury bond issues for 2007 to 5.34 trillion yuan.
Source: Xinhua