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China's Central Bank Signals Shift In Focus To Inflation

China's Central Bank Signals Shift In Focus To Inflation

China's central bank signaled that it would pay special attention to inflation, as it sees rising risks to domestic prices from global liquidity and labor shortage.

In its fourth-quarter monetary policy report, the People's Bank of China on Wednesday warned of imported price inflationary pressure.

The bank said commodity prices will be pushed up by surging capital inflows. Moreover, cost of products and services will rise on easing labor-supply growth.

An economic recovery together with demand growth will raise consumer prices in a faster manner, the bank noted.

The central bank vowed to curb speculative housing demand, while providing reasonable market liquidity and credit. It repeated the exchange rate reforms and the use of yuan in cross-boarder trade and investment.

Further, the bank observed "relatively strong" momentum in economic growth, but reiterated to maintain a "prudent" monetary policy and stable monetary conditions.

According to official figures, the economy expanded 7.9 percent in the fourth quarter, ending seven-quarters of slowdown. However, the economy grew 7.8 percent in whole year of 2012, the weakest pace in 13 years.

Despite slower growth, the central bank has held off further monetary easing since July last year due to inflation concerns.

China's external trade and inflation figures are due on February 8. Exports are forecast to grow at a faster pace of 17.3 percent in January, following a 14.1 percent rise in December.

Annual inflation is expected to ease sharply to 2 percent in January from 2.5 percent a month ago. In December, freezing weather and approaching Lunar New Year had pushed up food costs, which in turn lifted inflation to a seven-month high.

The inflation rate for the 2012 was 2.6 percent, well below the government's target of 4 percent.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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