China to maintain prudent monetary policy despite easing inflation

Beijing, Dec 10(ANI): China has vowed to maintain a prudent monetary policy, despite expectations that the easing inflation would encourage growth.

The country will "ensure stable and relatively fast economic growth, while adjusting the economic structure and regulating inflationary expectations next year", the China Daily quoted a Political Bureau of the Communist Party of China's statement, as saying.

The statement came in the wake of annual central economic work conference, the country's significant economic event, which will set economic policy guidelines.

Industrial Bank's Chief Economist Lu Zhengwei said the announcement indicated that policymakers would not take any abrupt or aggressive decision to loosen monetary tightening.

Zhengwei said the Chinese Government could undertake more structural tax cuts to boost growth by reviving the country's private sector and the small businesses.

Hong Kong-based Capital Focus Asset Management Director Simon Luk, however, said the Chinese Government would relax monetary policies if the country's economy weakened rapidly and the global economy enter a recession in 2012.

"If the central government is to ease monetary policy, the best strategy is to loosen the curbs on bank credit, particularly restrictions on bank lending to developers and other corporations. Currently, economic activity is sluggish in the country due to curbs on bank lending," Luk said.

Analysts predicted that slower-than-expected growth momentum would likely lead the government to stress on stabilizing growth and prevent financial risks, but another cut in the reserve ratio before the end of this year or in the first quarter of 2012 is likely.

An Asian Development Bank economist, Zhuang Jian, said taming inflation should remain the Chinese Government's key priority in 2012 taking into account rising labor costs, potential of soaring commodities prices and the possible soaring of imported inflation after the European Central Bank reduced interest rates to revive the eurozone economy. (ANI)