China's central bank repeats goal to continue moderately monetary policy

08:47, August 06, 2010      

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The People's Bank of China (PBOC), also known as the central bank, said Thursday it would maintain its moderately loose monetary policy and enhance financial supports to boost the economy's sustainable development.

The bank will apply multiple monetary tools to keep an appropriate growth in money supply in a bid to strike a balance between meeting the need of funding economic development and managing the inflation expectation, the PBOC said in a statement posted on its website.

The PBOC reiterated it would maintain continuity and stability in monetary policy while, at the same time, making the policy more specific and more flexible.

It vowed to improve the yuan's exchange rate mechanism, and increase financial support to promote the transformation of the economic growth pattern and adjustment of the economic structure.

China's broad money supply (M2), which covers cash in circulation and all deposits, increased 18.5 percent year on year to 67.39 trillion yuan by the end of June, which marked a slowdown from the 21 percent increase at the end of May, the PBOC said.

During the same period, narrow money supply (M1), cash in circulation plus current corporate deposits, climbed 24.6 percent from a year earlier to 24.06 trillion yuan, representing a decrease of 5.3 percentage points from the end of May, according to the PBOC.

The bank also warned of potential domestic inflation risks due to complicated situations both at home and abroad.

Increases in the costs of labor and environmental requirements, combined with continuing progresses in the reforms in the prices of resource products, will likely impact the inflation expectation.

Meanwhile, the central bank pointed out that external 'hot money' may push up price hike pressures.

"The global monetary situation is relatively loose, as nations across the world have been prudent in their stimulus exits due to continuing uncertainties in the economic recovery. Excessive money is likely to seek various outlets, adding potential risks of inflation expectations," the PBOC said in its statement.



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