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China’s losses in US credit crunch ‘digestible’: bank

China’s economy has weathered the US financial crisis better than expected but many external concerns remain, the country’s central bank chief said in comments reported yesterday.

“The negative impact of the US subprime crisis on the domestic economy seems so far smaller than originally expected,” the Shanghai Securities News quoted Zhou Xiaochuan (周小川) as saying.

Restructuring in the financial system has made China’s financial institutions healthier and losses caused by the US credit crunch are “controllable and digestible,” Zhou said.

But Zhou, who made the remarks during an IMF meeting in Washington over the weekend, warned that China’s economy is faced with mounting external uncertainties, which makes it harder for policy decisions.

Factors clouding the outlook of the global economy this year include turmoil in financial markets because of the US subprime crisis, inflation pressure and rising protectionism in some developed countries, Zhou said.

Preventing runaway inflation and overheating in the domestic economy remained the two key tasks for the Chinese authorities, he said.

China is scheduled to release key economic data for the first quarter on Thursday.

Zhou said exchange rates had only limited effects in easing trade imbalances and their role should not be overplayed, amid the continued push by the US for China to end controls on the yuan.

“The role of exchange rates in solving the imbalance in global trade is limited. Exaggerating their effects is unrealistic and will mislead the rebalancing process,” Zhou was quoted as saying.


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