Friday 19 November 2010

China rate rises no panacea to curb inflation: PBOC adviser

China rate rises no panacea to curb inflation: PBOC adviser
(Agencies)
Updated: 2010-11-18 11:06

China should not solely rely on interest rate rises to curb inflation, an academic adviser to the People's Bank of China said in remarks published on Thursday.

Zhou Qiren, who is also a professor at Peking University, said the government must take steps to tackle supply-side strains that have been a key factor pushing consumer prices.

Loose monetary policy in 2009 has created excessive liquidity and helped fuel prices of various products, he said.

"Much liquidity and fewer goods are the reasons behind inflation. Raising interest rates cannot change such a situation," he was quoted by the China Securities Journal as saying.

Zhou warned that liquidity had been channeled from the real estate market to other sectors of the economy, after Beijing took harsh measures to prevent a property bubble.

China's CPI hit a 25-month high of 4.4 percent in October, fuelling expectations of further tightening measures.

The PBOC has ramped up its efforts to tighten monetary conditions in the past month, increasing bank reserve requirements and surprising markets on Oct 19 by announcing the first rate rise in nearly three years.

http://www.chinadaily.com.cn/business/2010-11/18/content_11570306.htm

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