China targets proactive policy as PMI dips

09:24, August 02, 2010      

Email | Print | Subscribe | Comments | Forum 

China's central bank will continue to ensure an adequate money supply in 2010 to back up economic growth which has shown signs of slackening in June and July.

The People's Bank of China, the central bank, urged Sunday the country's banks to "effectively" enforce a moderately easy monetary policy in the following time this year, in an apparent bid to pump more liquidity and reverse a slowing-down trend.

Monetary policy is to become more proactive and flexible this year, analysts say.

After the National Statistics Bureau reported China's GDP lowered to 10.3 percent rise in the April-June quarter, from the faster 11.9 percent growth in the first quarter, the corporate purchasers' federation said the PMI index for July dipped further to 51.2 percent, dropping 0.9 percent from June. The index, a gauge of industrial activity, is the lowest in 17 months.

It doesn't augur well for the country's economy in the coming months, analysts have warned. They point to Beijing's hardening measures to cool off housing prices and its effort to re-caliber China's economic mix of inspiring domestic consumption by removing a big part of the export rebates as "negatives" to the economic growing momentum.

However, the central bank said in the policy statement that it will not depart from the "differentiated" housing loan policy, begun in mid April, which requires 50 percent down payment and 1.1 times the normal mortgage rates for second and more home-buyers in the cities. As a result, property speculation and investment has tapered off, and housing sales have plummeted.

Although China's policy-makers aren't expected to loosen the housing regulation in the remaining time of 2010, which will cause another bigger price bubble and endanger China's stability, analysts believe that Beijing will try to ensure monetary market liquidity to augment economic growth.

Some economists predict the central bank is to maintain a monthly 20 percent money supply growth in later months, which will bring this year's aggregate loans to 7.5-8.0 trillion yuan, as compared to last year's 9.6 trillion yuan, a record high to jump start a tumbling economy from the global financial crisis. In the first six months, total loans added up to 4.6 trillion yuan.

The central bank also asked for continuous efforts to adjust the country's economic structure, and manage people's inflation expectations. Beijing has promised to keep the annual inflation within three percent.

Lu Zhengwei, an economist with China's Industrial Bank, said that the central bank should allow for more loans in the third and fourth quarters to buffer the economy from landing hard.

However, Li Daokui, an economist at Qinghua University and member of the central bank's monetary policy committee, said that the slowdown is not surprising and largely a statistical phenomenon.

The low-base effect has contributed to the relatively slow growth in gross domestic product in the second quarter, Li said. He predicted that China's year-on-year GDP growth will be more than 10 percent this year.

By Li Hong, People's Daily Online


  • Do you have anything to say?


Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • Staff members watch a screen showing the blast-off of the Long March-2FT1 carrier rocket loaded with Tiangong-1 unmanned space lab module at Beijing Aerospace Control Center, Sept. 29, 2011. Commander-in-chief of China's manned space program Chang Wanquan announced Thursday night that the launch of Tiangong-1 space lab module was successful. (Xinhua/Wang Shen)
  • Chinese President Hu Jintao watches the launch of Tiangong-1 space lab module at Beijing Aerospace Control Center in Beijing, capital of China, Sept. 29, 2011. Other members of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, including Wu Bangguo, Jia Qinglin, Li Changchun, Xi Jinping, Li Keqiang and Zhou Yongkang, are also present. (Xinhua/Rao Aimin)
  • The graphics shows the launch procedures of the carrier rocket of Tiangong-1 space lab module, Long March-2FT1 on Sept. 29, 2011. (Xinhua/Lu Zhe)
  • Image taken from Beijing Aerospace Control Center shows a Long March-2FT1 carrier rocket loaded with Tiangong-1 unmanned space lab module blasting off from the launch pad at the Jiuquan Satellite Launch Center in northwest China's Gansu Province, Sept. 29, 2011. (Xinhua)
  • On Sept. 28, tourists travel around the Mingshashan Scenic Area in Dunhuang, Gansu province by camel. With the National Day vacation right around the corner, more and more tourists from home and abroad are going to Dunhuang. Riding on a camel, they travel in the desert to enjoy the cities rare form of natural scenery. (Xinhua/Zhang Weixian)
  • Chinese forest armed forces work together with forest firefighters on Sept. 28. (Xinhua/Chai Liren)
Hot Forum Discussion