Zhou Says China to Stick With `Tight
China will stick with a “tight'' monetary policy as the nation faces increasing pressures of inflation and over-investment amid global market turmoil, said central bank chief Zhou Xiaochuan.
China needs to correctly handle the “pace, focus and magnitude of macro-economic controls to avoid large fluctuations and maintain stable and relatively fast economic growth,'' Zhou, governor of People's Bank of China, said during the International Monetary Fund meeting in Washington, according to a statement posted on the central bank's Web site.
China, the world's fastest-growing major economy, is trying to prevent a flood of cash from the trade surplus and foreign investment from fanning inflation that is already at an 11-year high. The nation has accelerated the yuan's appreciation this year to ease pressure on inflation.
The currency has strengthened 4 percent against the dollar this year, bringing the yuan's advance to 18.4 percent since the end of its peg to the dollar in 2005. The currency closed in Shanghai on April 11 at 7.0065 per U.S. dollar.
“The exchange-rate has limited impact on adjusting the trade imbalance,'' Zhou said. “Over-exaggeration of its function is not only impractical but will also misguide the course of such an adjustment.''
U.S. Treasury Secretary Henry Paulson said last week in Beijing it was “dangerous'' for the exchange rate not to reflect the fundamentals of the world's fourth-largest economy fast payday loan no faxing.
Slowing World Economy
A slowing world economy has helped promote trade protectionism, Zhou said, urging all governments to stand up against such sentiment.
Financial market turbulence triggered by the U.S. subprime meltdown is the biggest problem in 2008, Zhou said. Developed nations should shoulder the main responsibilities of stabilizing global financial markets and adjust their own economic policies accordingly, he added.
Emerging markets need to “closely'' monitor trade and the change of capital flows to enhance their ability to buffer impacts from the outside and to ensure the healthy development of their own economies, China's central bank governor said.
China hasn't raised interest rates this year, even after consumer prices climbed 8.7 percent in February from a year earlier, the fastest pace since May 1996. That may be because higher rates will attract overseas money to an economy already flooded with cash from trade surpluses.
The central bank raised interest rate six times in 2007, taking the key one-year lending rate to 7.47 percent.
China's first-quarter consumer prices remained high and fixed- asset investment kept increasing at a fast pace, Zhou said. Export growth slowed and the trade surplus is showing a trend of decreasing, he said.
Filed under: finance by Finance Boss