2007年12月07日11:36
The announcement by China's leadership of a tougher economic policy for 2008 shows a new consensus that more has to be done to address risks of inflation and overheating in the nation's fast-growing economy.
The new position, which formalizes a policy shift already under way over the past couple of months, was announced yesterday at the close of the annual Central Economic Work Conference chaired by President Hu Jintao.
The rise in inflation, which this year was running at 4.4% through October, has become a major concern of the leadership and has apparently trumped any worries about a slowdown in the world economy.
Although policy makers have been expressing concerns about rapid growth in bank lending and corporate investment for some time, inflation brought new worries of eroding living standards and increased social tensions.
China's inflation has so far been confined mostly to food prices, but it is a definite concern. In October, for example, cooking oil cost 34% more than a year earlier. Policy makers say their goal is to prevent such price increases from spreading throughout the economy.
In order to achieve that, a 'tight' monetary policy will be followed for 2008, a rare and significant change in the official stance. Since the middle of this year, officials had characterized China's monetary policy as 'stable-to-tight,' which itself was somewhat tougher language than the previous standard of a 'stable' monetary policy.
The new policy was announced by the central bank and the main economic-planning agency, the National Development and Reform Commission, two bodies sometimes seen to be at odds.
What form next year's tighter policy could take is uncertain, but more direct controls of bank lending seem certain to be part of the mix. In recent weeks, the central bank has been rolling out a tougher supervision system to try to ensure that commercial banks next year will adhere to often-ignored lending quotas.
If inflation doesn't retreat, some further interest-rate increases are also possible. The benchmark deposit rate, at 3.87%, is below the rate of inflation -- meaning households are effectively losing money on bank savings.
Analysts say measures taken this year have been moderate and have done relatively little to restrain economic activity. Five increases in interest rates have barely kept up with accelerating inflation, thus the cost of borrowing didn't rise, or even declined, in real terms.
The central bank has also periodically ordered commercial banks to keep more money on reserve. But such increases in the so-called reserve-requirement ratio just kept up with the flow of cash into the economy from the country's large trade surplus, and so haven't seriously restricted the funds available for lending.
Indeed, economic growth accelerated to 11.5% for the first three quarters of this year, from 11.1% in 2006, and its momentum is powerful. Most analysts expect only a very moderate slowdown next year, even taking into account the weakening U.S. economy and tighter domestic policy. The State Information Center, a Chinese government think tank, this week forecast economic growth of 10.8% for 2008.
Many economists also expect China to allow its currency to strengthen at a faster pace next year, in part because a stronger currency helps combat inflation by making imports cheaper. The yuan has risen about 5.5% against the U.S. dollar this year, but the effect of that gain has so far been limited because the dollar itself has been sharply declining against other currencies.
Andrew Batson
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