Leaders vow economic vigilance
By Maggie Zhang |
December 10, 2011, Saturday
|
Print Edition
Print Edition
China will maintain a prudent monetary policy and a proactive fiscal policy and keep an "unswerving stance" on property-market control next year, it was announced yesterday at a meeting of the Political Bureau of the Communist Party of China Central Committee.
The statement of the Politburo, widely seen as setting the tone for China's economic policy for 2012, came ahead of the Central Economic Work Conference to be held later, which will set guidelines to carry out the policy for the coming year.
At yesterday's meeting, it was agreed that China will continue to balance efforts to "ensure stable and relatively fast economic growth, while adjusting the economic structure and regulating inflationary expectations next year."
The meeting also said the country will maintain its firm hand on the property market next year to return housing prices to reasonable levels, keeping the industry healthy.
Economists read the Politburo's stance as pro-growth against moderating inflationary pressure and decelerating economic growth. Economic data for November showed yesterday that industrial output growth weakened but domestic consumption growth came in better than expected.
"The wording of prudent can have an elastic meaning, and we read it as pro-growth with more flexible and forward-looking moves to come," said Qu Hongbin, HSBC's chief economist in China. "The taming of inflation offers more room for policy-makers to loosen monetary policy."
Qu said he expects China to cut banks' reserve requirement ratio three times next year - 0.5 percentage point each time. He said one cut in interest rates could happen in the second half of next year.
He also said fiscal policy will remain the key pillar to shore up growth and that more tax incentives might be given to small businesses.
Li Wei, a Standard Chartered Bank economist in Shanghai, held similar views. The rhetoric still points to "prudent," he said, but noted there could be more loosening of monetary policy.
China has already eased monetary policy to aid growth. On Monday, the central bank cut the amount of cash lenders need to set aside as reserves for the first time since 2008.
China's economic growth slowed this year against weakening external demand and the woes of the European debt crisis. Its GDP growth slowed to 9.1 percent in the third quarter from 9.5 percent in the second quarter, and 9.7 percent in the first quarter.
In December last year, the Politburo said the nation would shift its monetary policy stance to "prudent" from "moderately loose" in 2011, with taming inflation the top priority. At that point, the government already raised interest rates and reserve requirements, indicating that the official rhetoric could lag behind actual moves.
But some market watchers argued there wouldn't be sudden and wide loosening, considering the aftermath of a flood of credit in 2008 and 2009.
China's 4 trillion-yuan (US$631 billion) stimulus package helped the economy but also left the country with issues including mounting debt of local government financing platforms and rampant speculation in the housing market, driving home prices beyond the reach of most people.
The statement of the Politburo, widely seen as setting the tone for China's economic policy for 2012, came ahead of the Central Economic Work Conference to be held later, which will set guidelines to carry out the policy for the coming year.
At yesterday's meeting, it was agreed that China will continue to balance efforts to "ensure stable and relatively fast economic growth, while adjusting the economic structure and regulating inflationary expectations next year."
The meeting also said the country will maintain its firm hand on the property market next year to return housing prices to reasonable levels, keeping the industry healthy.
Economists read the Politburo's stance as pro-growth against moderating inflationary pressure and decelerating economic growth. Economic data for November showed yesterday that industrial output growth weakened but domestic consumption growth came in better than expected.
"The wording of prudent can have an elastic meaning, and we read it as pro-growth with more flexible and forward-looking moves to come," said Qu Hongbin, HSBC's chief economist in China. "The taming of inflation offers more room for policy-makers to loosen monetary policy."
Qu said he expects China to cut banks' reserve requirement ratio three times next year - 0.5 percentage point each time. He said one cut in interest rates could happen in the second half of next year.
He also said fiscal policy will remain the key pillar to shore up growth and that more tax incentives might be given to small businesses.
Li Wei, a Standard Chartered Bank economist in Shanghai, held similar views. The rhetoric still points to "prudent," he said, but noted there could be more loosening of monetary policy.
China has already eased monetary policy to aid growth. On Monday, the central bank cut the amount of cash lenders need to set aside as reserves for the first time since 2008.
China's economic growth slowed this year against weakening external demand and the woes of the European debt crisis. Its GDP growth slowed to 9.1 percent in the third quarter from 9.5 percent in the second quarter, and 9.7 percent in the first quarter.
In December last year, the Politburo said the nation would shift its monetary policy stance to "prudent" from "moderately loose" in 2011, with taming inflation the top priority. At that point, the government already raised interest rates and reserve requirements, indicating that the official rhetoric could lag behind actual moves.
But some market watchers argued there wouldn't be sudden and wide loosening, considering the aftermath of a flood of credit in 2008 and 2009.
China's 4 trillion-yuan (US$631 billion) stimulus package helped the economy but also left the country with issues including mounting debt of local government financing platforms and rampant speculation in the housing market, driving home prices beyond the reach of most people.
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