PBOC deputy governor expects CPI decline

14:09, May 05, 2011      

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China's consumer price index (CPI), a main gauge of inflation, will decline in the second half of the year, China Securities Journal reported.

Yi Gang, the deputy governor of the central bank and head of the State Administration of Foreign Exchange, said the People's Bank of China (PBOC), China's central bank, will continue to strengthen control over liquidity by manipulating the deposit reserve ratio and central bank bills.

"We have confidence in keeping inflation under control as related departments have positive responses," Yi said.

Yi pointed out that the biggest source of liquidity came from foreign exchange reserves. He said the central bank had, through measures of raising deposit reserve ratio and issuing central bank bills, withdrawn 80 percent of base currency which were released to the market because of foreign exchange reserves.

He thought the emerging market countries' currencies should be gradually included in the Special Drawing Rights (SDR). Including the currencies of BRIC nations – Brazil, Russia, India and China – will stabilize the fluctuation of SDR and make it more representative and reasonable.

He suggested the International Monetary Fund (IMF) launch a new round of investigation in SDR when conditions mature, the newspaper reported.

Source: China Daily
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