Bank to control money, credit growth

Updated: 2007-02-07 09:29

China's central bank has pledged to strengthen efforts to effectively manage the amount of cash in the financial system, according to the summary of a meeting held earlier this week that was published on Wednesday.

The summary, published in the official Financial News, also said the central bank had reiterated its long-standing commitment to gradually letting the yuan become more flexible.

It cited People's Bank of China vice-governor Xiang Junbo as saying that this year, the central bank aimed to put the effects of macro-economic control measures on a more solid footing.

"We need to maintain the continuity and stability of financial tightening measures," the paper cited Xiang as saying.

"We should strengthen management of liquidity and improve the conducting of monetary policy, in order to reasonably control growth in money supply and credit."

The central bank has raised interest rates twice and increased banks' reserve requirements four times since last April in an effort to rein in a credit-fuelled investment boom.

Annual growth in the broad M2 measure of money supply slowed to 16.9 percent in December, after hovering in the 18-19 percent range for much of last year.

Growth in urban fixed-asset investment came down to 24.5 percent for the whole year, after hitting 31.3 percent in the first half.

But some economists have cautioned that money and credit growth could bounce back at the beginning of the year, as commercial banks sought to lend more of their new loan mandates early on to maximize interest income.

Many of them expect the central bank to raise interest rates again early this year.

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