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CHINA is unlikely to relax its tightening monetary policies anytime soon, and the inflation rate may stay high but controllable under such a policy stance, economists said yesterday.
“China’s current relatively prudent monetary policy is a proper choice to deal with inflation,” Morgan Stanley’s Wang Qing said at the Lujiazui Forum. “Price levels may stay high in the near term, and policy makers should not scale back the strength of tightening measures.”
Wang Xiaoya, vice director-general of the People’s Bank of China’s research bureau, said it was important to manage inflation expectation at present.
“We should not only use ‘hard’ tools such as interest rate increases to contain inflation, but also, we should pay attention to ‘soft’ tools, like how to best communicate with the general public, to reduce inflation expectation,” Wang said.
China’s Consumer Price Index, the main gauge of inflation, expanded 5.3 percent from a year earlier in April, a little slower than the pace in March’s 5.4 percent.
Policy makers face a dilemma in carrying out tightening measures because too much tightening will hurt China’s economic growth.
Chen Zhiwu, a finance professor at Yale University, said private firms in China had felt the pinch. China may be too anxious to take such countering actions, Chen said.
“Just like when a kid gets a fever, you had better let the kid run the fever for three days to allow the immune system to start to work,” Chen said.
Lian Ping, chief economist at the Bank of Communications, said China’s inflation rate would stay high, but was definitely controllable. – Shanghai Daily