China Shifts Policy To Choke Inflation

The announcement by China's leadership of a tougher economic policy for 2008 shows a new consensus that more has to be done to address risks of inflation and overheating in the nation's fast-growing economy.

The new position, which formalizes a policy shift already under way over the past couple of months, was announced yesterday at the close of the annual Central Economic Work Conference chaired by President Hu Jintao.

The rise in inflation, which this year was running at 4.4% through October, has become a major concern of the leadership and has apparently trumped any worries about a slowdown in the world economy.

Although policy makers have been expressing concerns about rapid growth in bank lending and corporate investment for some time, inflation brought new worries of eroding living standards and increased social tensions.

China's inflation has so far been confined mostly to food prices, but it is a definite concern. In October, for example, cooking oil cost 34% more than a year earlier. Policy makers say their goal is to prevent such price increases from spreading throughout the economy.

In order to achieve that, a 'tight' monetary policy will be followed for 2008, a rare and significant change in the official stance. Since the middle of this year, officials had characterized China's monetary policy as 'stable-to-tight,' which itself was somewhat tougher language than the previous standard of a 'stable' monetary policy.

The new policy was announced by the central bank and the main economic-planning agency, the National Development and Reform Commission, two bodies sometimes seen to be at odds.

What form next year's tighter policy could take is uncertain, but more direct controls of bank lending seem certain to be part of the mix. In recent weeks, the central bank has been rolling out a tougher supervision system to try to ensure that commercial banks next year will adhere to often-ignored lending quotas.

If inflation doesn't retreat, some further interest-rate increases are also possible. The benchmark deposit rate, at 3.87%, is below the rate of inflation -- meaning households are effectively losing money on bank savings.

Analysts say measures taken this year have been moderate and have done relatively little to restrain economic activity. Five increases in interest rates have barely kept up with accelerating inflation, thus the cost of borrowing didn't rise, or even declined, in real terms.

The central bank has also periodically ordered commercial banks to keep more money on reserve. But such increases in the so-called reserve-requirement ratio just kept up with the flow of cash into the economy from the country's large trade surplus, and so haven't seriously restricted the funds available for lending.

Indeed, economic growth accelerated to 11.5% for the first three quarters of this year, from 11.1% in 2006, and its momentum is powerful. Most analysts expect only a very moderate slowdown next year, even taking into account the weakening U.S. economy and tighter domestic policy. The State Information Center, a Chinese government think tank, this week forecast economic growth of 10.8% for 2008.

Many economists also expect China to allow its currency to strengthen at a faster pace next year, in part because a stronger currency helps combat inflation by making imports cheaper. The yuan has risen about 5.5% against the U.S. dollar this year, but the effect of that gain has so far been limited because the dollar itself has been sharply declining against other currencies.

中国领导层关于2008年要收紧经济政策的表态显示，需要做更多工作来防范中国经济在快速增长中所蕴藏的通胀和过热风险这一共识已经形成。

体现这一新共识的政策转变在过去几个月中业已发生，而由中国国家主席胡锦涛主持的今年中央经济工作会议(Central Economic Work Conference)在周三闭幕时则明确宣布了中央这个新的政策立场。

中国今年截至10月末的通货膨胀率已经达到4.4%，这成了中国领导层主要担忧的问题，对它的担忧程度显然超过了对世界经济增长放缓的忧虑。

中国的政策制定者们一直在担心银行贷款和企业投资的快速增长，而当前的通货膨胀形势给他们又添新愁，因为这不仅影响了人们的生活水平，也加剧了社会紧张程度。

虽然迄今为止中国严峻的通货膨胀形势还主要局限在食品价格方面，但该问题显然无法让人掉以轻心。以今年10月为例，食用油价格已较去年同期上涨了34%。中国的决策人士表示，他们的目标是防止这一价格上涨势头蔓延到整个经济领域。

为实现这个目标，中国2008年将执行“从紧”的货币政策，这是中国官方立场少见的重大转变。自今年年中以来，官员们一直将货币政策描述为“稳中趋紧”，较之要保持货币政策“稳定”的以往一贯立场，官员们的口风已有所收紧。

这一新的政策立场是由中国央行(PBOC)和中国最主要的经济规划机构国家发展和改革委员会(National Development and Reform Commission)共同宣布的，而这两个机构的意见以往并不总那么一致。

明年将采取何种方式来收紧政策还不得而知，但几乎可以肯定的是，更直接地对银行放贷行为进行控制将是措施之一。最近几周央行一直在推行一项更严格的贷款监督机制，以确保各商业银行明年能严格遵守以往常常被忽略的贷款额度限制。

如果通货膨胀形势不出现缓解，中国有可能会进一步加息。目前3.87%的基准存款利率已低于通货膨胀率，这意味着人们将钱存入银行会赔钱。

分析人士指出，今年实施的紧缩措施一直比较温和，在给经济降温方面收效相对不大。央行今年虽先后五次加息，但加息的步伐却赶不上日渐加快的通货膨胀率增幅，因此实际贷款成本不仅没有增加，甚至下降了。

今年央行每隔一段时间就会上调各商业银行存款准备金率，但这种调控措施只将将可以应付中国巨额贸易顺差给金融体系带来的大量流动资金，因此对抑制银行放贷没起到多大作用。

事实上，中国经济的增长速度已经从去年的11.1%加快到今年前3个季度的11.5%，且增长动力依然十足。许多分析人士预计，就算受到美国经济增长减速和国内政策收紧的影响，中国明年的经济增长速度也只是略有放缓。政府智库国家信息中心(State Information Center)本周预测说，中国2008年的经济增长率将达到10.8%。

许多经济学家还预计中国明年会允许人民币以更快的速度升值，部分原因在于本币升值能降低进口产品的价格，从而有助于遏制通货膨胀。虽然人民币兑美元汇率今年已上升了5.5%，但其作用迄今为止却并不明显，原因是美元兑其他货币的汇率出现了大幅下跌。

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