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People's Daily Online>>China Business

China should continue tight monetary policy

By Tang Min (People's Daily)

16:00, February 13, 2012

Edited and Translated by People's Daily Online

The food price has turned into the main cause for the CPI rise, and behind it, it is the rising labor cost. In recent years, the wage of migrant workers has been increasing by 20 percent annually because of the shortage of migrant workers in part of China.

Due to the decreasing income from farming, the wage of temporary workers in rural areas has obviously risen. Meanwhile, the outflow of farmers and the large-scale rural land transfer have also increased the rural regions' demand for temporary workers. Pushed by this factor, the cost of agricultural products and the food price are rising rapidly.

The price rise of agricultural products has a great significance for narrowing the gap between the urban and rural areas and guaranteeing the supply of agricultural products. Since the income gap between the urban and rural areas is very large, narrowing the gap will take quite a long time, and therefore, the food price will still rise for a medium or a long period.

Under current situation that the excess liquidity has not been fully changed and many factors supporting the price rise still remain, China still needs to adopt a relatively tight monetary policy. China could maintain its flexibility by adjusting the deposit-reserve ratio and making market operations transparent, but should not change it much in general.

While maintaining the stability of the monetary policy, China should also give preferences for small and medium-sized enterprises with credit aid and bond issuing. In this process, China's financial organizations and supervising departments must make sure that capitals indeed flow into the small and medium-sized enterprises, make sure the effectiveness of the macroeconomic control, and strictly forbid the capitals from flowing into large enterprises or real estate development enterprises through illegal channels.

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