China’s Wen: con­fi­dent on in­fla­tion af­ter rate rise

The Pak Banker - - I Nternational -

BEI­JING: China's govern­ment will be able to keep in­fla­tion in check, Premier Wen Ji­abao said on Sun­day, a day af­ter the cen­tral bank raised in­ter­est rates, and he pledged to speed up ef­forts to rein in house price surges.

Steps taken in the past month, in­clud­ing ad­min­is­tra­tive con­trols to curb spec­u­la­tion and mon­e­tary tight­en­ing, had started to pro­duce re­sults, Wen said.

The Peo­ple's Bank of China raised in­ter­est rates on Christ­mas Day for a sec­ond time in just over two months as Bei­jing strength­ened its bat­tle against stub­bornly high in­fla- tion. An­a­lysts said the lat­est rise showed that mea­sures such as in­creas­ing banks' re­quired re­serve re­quire­ments to rein in liq­uid­ity were not enough on their own, and that the Chi­nese au­thor­i­ties were de­ter­mined to keep in­fla­tion un­der con­trol.

"We have raised re­serve re­quire­ment ra­tio for six con­sec­u­tive times and in­creased in­ter­est rates twice to ab­sorb ex­cess liq­uid­ity in the mar­ket to keep it at a rea­son­able level to sup­port eco­nomic devel­op­ment," Wen said in a state ra­dio broad­cast a day af­ter the rate rise. "I be­lieve we can keep prices at a rea­son­able level through our ef­forts. As a ma­jor leader of the govern­ment, I have the re­spon­si­bil­ity and I have the con­fi­dence, too," he said in re­marks pub­lished on www.cnr.cn. The rate rise came af­ter Bei­jing said ear­lier in De­cem­ber it was switch­ing to a "pru­dent" mon­e­tary pol­icy, from its ear­lier "mod­er­ately loose" stance. "The rate rise shows China is quick­en­ing its pace to nor­mal­ize mon­e­tary poli­cies," said Ba Shu­song, a se­nior econ­o­mist with the Devel­op­ment Re­search Cen­ter, un­der State Coun­cil, coun­try's cabi­net. \ Chi­nese au­thor­i­ties have re­peat­edly stressed the im­por­tance of stay­ing ahead of the curve in the bat­tle against in­fla­tion. "In­fla­tion­ary ex­pec­ta­tion is worse than in­fla­tion it­self," Wen said in the ra­dio broad­cast. "When there is in­fla­tion, we must es­tab­lish con­fi­dence, know our van­tage points and take force­ful and de­ci­sive mea­sures in a timely man­ner to curb price rises." The cen­tral bank said on Fri­day it would de­ploy a range of mea­sures to head off in­fla­tion­ary pres­sures and as­set bub­bles. China also in­ten­si­fied its prop­erty tight­en­ing mea­sures in April and Septem­ber in an at­tempt to brake soar­ing prop­erty prices. "Un­til now, the mea­sures are not im­ple­mented well enough, and we will re­in­force our ef­forts in two ways," Wen said. The govt plans to build 10 mil­lion units of af­ford­able hous­ing in 2011, up from this year's tar­get of 5.8m. China will also in­crease ef­forts to curb spec­u­la­tion in the real es­tate mar­ket, mainly through mon­e­tary poli­cies and stricter use of land, Wen said, with­out giv­ing de­tails. Prop­erty trans­ac­tions as well as land costs, a ma­jor con­trib­u­tor to high hous­ing prices, have shown signs of a re­bound in re­cent weeks, trig­ger­ing con­cerns of more tight­en­ing. -Reuters

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