By Maverick Chen
"Adhering to a moderately tight currency system along with a flexible and relatively liberal financial policy is critical to maintaining stable economic development and stabilizing price inflation," said Wu Xiaoling, Vice Director of the Financial and Economics Affairs Committee of the National People's Congress on September 17.
She also thinks the measures taken last Sunday by the People's Bank of China (PBC), China's central bank, represent only a moderate adjustment to current monetary policies, and do not signify a radical change of direction. The new regulations reduce interest rates and lower the threshold for commercial banks' reserve funds.
While addressing a forum initiated by Sina, Wu said that the temporary slowdown in the Chinese economy is in accordance with the government's macro-adjustment and control, and excessive concern is not necessary as there is still room for growth in the domestic economy as internal markets are further opened up and exploited.
According to Wu, a moderately tight currency policy along with proper constraints on the credit market are important elements to cope with the inflation that the country is still facing, whereas loosening the control of commercial banks is likely to result in the release of further inflationary pressures.
A new round of economic reform is needed to suit the transformation and development of China's economy, including rejuvenating enterprises, granting people more autonomy in using financial tools, a reduction in the monitoring and control of finance, and measures to revitalize the economy.
In response to the public's concern, Wu clarified that China's foreign exchange reserves did drop during the subprime lending crisis but not as far as previously thought, and that the current reforms on the foreign exchange system might improve the situation.
(China.org.cn September 19, 2008)
