Tuesday, July 12, 2011

Inflation is Top Priority For Chinese Government

Beejing, July, 12: Price rise has become the prime priority for the Chinese Premier and the Government will maintain its current economic policy, to tame the inflation going forward.

Chinese premier Wen Jiabo said that "We must treat stabilizing overall price levels as the top priority of our macro-economic controls and keep the direction of macro-economic adjustments unchanged," the comments followed official data on Saturday that showed annual inflation in June hit a three-year high of 6.4 %.

He further said that the Chinese government would try to stabilize the prices of pork, a staple meat on Chinese dinner tables and the most closely watched item in inflation control, by boosting the supply of hogs.

Meanwhile, China's central bank all set to maintain a "prudent policy" to tame stubbornly high inflation.

"The most prominent problem in macro-economic operations is the relatively big inflationary pressure and still strong inflationary expectations," China central bank chief  Zhou wrote in the latest edition of China Finance magazine, published by the People's Bank of China.

The spikes in  inflation in June, which was directed by rising food and property costs, given the enough reason for the regulator to increase the  interest rate in the next few months.

 The Chinese central bank has relied on raising bank reserve requirement ratios to soak up excessive cash in the economy, increasing the ratio nine times since October to a record high of 21.5 percent. At the same time It has also raised the interest rates five times since then.

"The market-oriented tools, which oppose to administrative measures, typically include interest rates and exchange rate. Bank reserve ratios are more market-oriented than direct lending controls," said Gao Shanwen, chief economist at China Essence Securities in Beijing.


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