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China's Policy Tightening to Continue: Central Banker

Reuters
Sunday, 28 Oct 2007 | 10:33 PM ET

China will stay the course on monetary tightening and keep a lid on money supply and credit growth, a top central bank official said.

Su Ning, vice governor of the People's Bank of China (PBOC), was speaking a few days after data showed the Chinese economy was still roaring ahead, feeding expectations an interest rate rise could be in store.

"We will continue implementing a stable monetary policy leaning toward moderate tightening," Su told a financial forum in Xianghe, Hebei Province, which surrounds Beijing.

Annual growth eased slightly in the third quarter to 11.5 percent and annual consumer price inflation in September slowed to 6.2 percent, not far from a decade high of 6.5 percent in August, official figures showed.

"We will enhance economic control efforts at appropriate times to ensure money supply and credit growth remain stable," Su said.

He did not elaborate on any specific policy measures, saying only the central bank would be flexible in using a variety of tools.

China has raised interest rates five times this year and banks' required reserves eight times. The central bank has also engaged in window guidance, or moral suasion, to get commercial banks to rein in their lending.

But Su said some banks had yet to get the point.

"Some financial institutions in their credit management did not fully understand the intention of the central government's macroeconomic controls," he said.

Yuan-denominated lending rose 17.1 percent in September from a year earlier, pushing the total of new loans in the first nine months of the year up to 3.36 trillion yuan ($448.8 billion).

That already exceeds the 3.18 trillion yuan in new yuan loans in all of 2006, when the central bank had set an original target of 2.5 trillion yuan.