Wed, Apr 04, 2012 - Page 10 News List

Fed should consider its actions: PRC bank governor

Bloomberg

China’s central bank said the US Federal Reserve has a responsibility to consider the global effects of its actions after emerging-market economies suffered from capital inflows.

Because the US dollar is the world’s main reserve currency, the Fed “may have more responsibility not only to consider the US economy, but also the global economy,” People’s Bank of China Governor Zhou Xiaochuan (周小川) Zhou said yesterday during a panel discussion at the Boao Forum for Asia — a gathering of government and business leaders — on Hainan Island.

Zhou’s comments reprise criticism of the US from emerging nations, which said that so-called quantitative easing was sending unwanted cash into their economies, adding to inflationary risks.

Fed Chairman Ben Bernanke said last week the central bank would consider further stimulus, even after upgrading its economic outlook on March 13.

For China and some other emerging economies, the policy goal is to “gradually bring inflation down” to help achieve a so-called soft landing, and China is using interest rates combined with additional tools to achieve that, Zhou said.

The governor declined to comment when asked if the central bank is planning any adjustments to monetary policy.

Expanding domestic demand and reducing the trade surplus have also been part of China’s strategic plan since the global financial crisis, Zhou said.

Analysts in a Bloomberg News survey last week unanimously said that banks’ reserve requirements would fall this year, while nine of 20 predicted lower benchmark borrowing costs.

China’s economy might have expanded about 8.4 percent in the first quarter, the least since the first half of 2009, according to an estimate given by an official 10 days before the data are due.

National Reform and Development Commission Vice Chairman Zhang Xiaoqiang (張曉強) cited “relevant China research institutes’ initial figures” for the estimate and predicted a gain of about 3.5 percent in consumer prices.

The growth figure compares with the 8.3 percent median estimate of 28 economists surveyed by Bloomberg News. The fifth straight slowdown in quarterly growth will underscore concerns that weakness in the Chinese economy is set to limit a global expansion already capped by Europe’s austerity measures.

“The final number will be very close to 8.4 percent,” Lu Ting (陸挺), chief Greater China economist at Bank of America Corp in Hong Kong, said in an interview in Boao.

“They can get a relatively accurate forecast or estimate of first-quarter GDP,” he added.

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