China to tighten monetary policy in 2008
Updated: 2007-12-05 19:00
The Central Government urged to "moderately tighten money supply" on the basis of prudent monetary policy in June 2007, the first time the central government used the word "tighten" for monetary policy since 1997.
Observers believed China would continue to face high inflationary pressure next year. In international markets, oil prices would continue their exposure to high volatility and grain prices would keep rising.
In the domestic market, high food prices, a major contributor to the country's CPI growth, would likely force up labor costs and then production cost in different sectors.
Prof. Song Guoqing predicted that a sixth interest rate rise was around the corner. "Next year, the central bank will likely grant loan quota to commercial banks quarter by quarter, instead of year by year, which will better control credit," he said.
The observers said it was noteworthy that while the monetary policy went tighter, the fiscal policy would remain prudent.
"Considering requirements of improving people's lovelihood, major construction projects, economic restructuring and of energy saving and emissions reduction, the country's fiscal expenditure will remain huge next year. It is unsuitable for the fiscal policy to turn to tight," said Prof. Zhu Qing of the business school of the prestigious Renmin University.
The State Information Center forecast China's GDP growth at 11.4 percent for this year and at 10.8 to 11.3 percent for 2008.
According to its prediction, the country's CPI will rise 4.7 percent this year, 2.9 percentage points higher than the previous year, and go up 4.5 percent for next year. The exports will increase by 25.7 percent, and imports by 20 percent, with the trade surplus forecast at US$268 billion, US$90.5 billion higher than the 2006 level.
The center said 8.9 trillion yuan (US$1,202 billion) was invested in fixed assets in urban areas in the first 10 months of this year, up 26.9 percent on the same period of last year. The growth has stayed at around 20 percent for 78 months, the center added, predicting the pace at 25.5 percent for the whole of this year and 23.5 percent for 2008.
According to the Central Economic Work Conference, China should fulfill its economic development goals for next year in a steady manner, so as to maintain the economy on a stable, rapid and healthy track.
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