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China to continue tight monetary policy, central bank says

(Xinhua)
Updated: 2008-03-31 18:20

BEIJING - The People's Bank of China (PBOC), the central bank, said on Monday that the country would continue with its tight monetary policy, which would be adjusted in response to changes in the domestic and world economies.

According to a circular on the PBOC website, the regular first-quarter monetary policy committee meeting decided that the economic and financial situations were stable.

Related readings:  China not to curb CPI at cost of global economy  CPI to remain high before easing in 2nd half  China to adopt monetary policies properly: Wen  Tight monetary policy must not be relaxed  PBOC chief treads with caution on interest rate  Central Bank: Global markets to 'remain turbulent'

The consumer price index (CPI) increased by 8.7 percent year-on-year in February, the biggest jump in nearly 12 years and well above the annual target of 4.8 percent set by the central government for 2008.

Domestically, the country faced pressure from a resurgence in fixed asset investment, excessive credit supply and liquidity, according to the central bank.

As the credit crisis deepened, the uncertainties and risks of the global economy were on the rise, said the committee.

Credit preference would be given to relatively weak sectors including agriculture, employment, education and small and medium-sized enterprises.

The central bank will continue improving the exchange rate regime "in a pro-active, manageable and gradual manner" while allowing the market to play a bigger role in determining the rate. It would also introduce more flexibility to the renminbi exchange rate and keep it stable at a reasonable and balanced level, said the central bank.

Reform of the foreign exchange management regime should also be improved, said the committee.