Sun, Jan 01, 2012 - Page 11 News List

China’s full-year CPI may rise 5 percent

CHANGE IN PRIORITIES:Although inflation is above the country’s 4 percent target, analysts expect China’s central bank to cut banks’ reserve ratios by Lunar New Year

Bloomberg

China’s Consumer Price Index (CPI) probably rose about 5 percent in the past year, exceeding the government’s target of 4 percent, Caixin magazine reported on its Web site, citing People’s Bank of China Governor Zhou Xiaochuan (周小川).

Inflation controls have had some effect and are headed in the right direction, though the government still cannot be very optimistic about gaining total control over inflation, Zhou was quoted as saying.

Separately, the central bank “will continue to implement -prudent monetary policy” and “ensure the continuity and stability” of policy this year, Zhou said.

The central bank will also “continue to deepen financial reform, accelerate the development of financial markets and strengthen and improve foreign exchange management,” Zhou said in a New Year message posted to the Chinese central bank’s Web site.

Inflation, which in November moderated to the slowest pace in 14 months, went unmentioned. The need to control price gains had been listed as last year’s top -priority by Premier Wen Jiabao (溫家寶).

Expansion of the world’s -second-biggest economy is slowing as global growth falters and Wen maintains curbs on the property market to cool speculation and price gains.

The central bank might cut banks’ reserve ratios by Jan. 23, when the Chinese Lunar New Year begins, because Wen is likely to tilt his focus toward sustaining growth as inflation moderates.

“Accumulating evidence of weakness is building the case for policy easing,” Citigroup Inc economists, including Citigroup China senior economist Ding Shuang (丁爽), said in a report before yesterday’s release, citing the slower pace of expansion in industrial production and fixed-asset investment. “We expect more policy easing in the months ahead, starting with another reserve ratio cut by the Chinese New Year.”

China’s GDP expanded 9.1 percent from a year earlier in the third quarter, the least in two years. The pace may have fallen to 8.5 percent in the fourth quarter, Ding said in a note on Friday.

Inflation slowed to 4.2 percent in November, still above the government’s target of 4 percent for the whole year.

Zhou said the central bank would maintain a reasonable scale of social financing and make efforts to optimize the credit structure.

China reduced in November the amount of money banks must park with the Chinese central bank, the first cut since 2008, freeing cash to support growth as Europe’s debt crisis capped exports and the property market cooled.

Manufacturing contracted for a second month last month, a purchasing managers’ index released by HSBC Holdings PLC showed on Friday. In November, China’s export growth was the weakest since 2009, excluding seasonal distortions at the start of each year.

Zhou also reiterated that China, the world’s biggest holder of foreign reserves, would work to strengthen and improve foreign-exchange management, improve financial services and management, and prevent systemic financial risks.

The central bank aims to “promote sound and fast economic development in China” to welcome the 18th National Congress of the Chinese Communist Party this year, the statement said.

The yuan gained 4.7 percent last year, its best performance since 2008. It advanced 0.4 percent to 6.294 on Friday in Shanghai, breaking the 6.3 mark for the first since 1993, according to the China Foreign Exchange Trade System.

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