China needs to stay vigilant in its inflation fight as Europe's debt crisis festers, but monetary policy alone cannot quell price pressures, a former bank regulator said in comments published on Thursday. The remarks from Tang Shuangning, a former chairman of China Banking Regulatory Commission, come just days after Beijing signalled possible fine-tuning of its policy tightening stance.
China's inflation is driven not just by excess money, but by speculation and natural disasters, Tang said. He said the need for China to calm price pressures is accentuated by Europe's debt crisis as the bloc may launch a round of quantitative easing to tackle its problems, at the expense of fuelling global inflation.
"It would not work to depend only on monetary policy to solve the inflation problem," Tang, now chairman of financial conglomerate China Everbright Group, wrote in the Financial News, a paper run by the central bank. Tang cited examples of sudden surges in garlic and bean prices as driven by speculative buying and noted panic purchases of salt in some Chinese cities after Japan's nuclear crisis.
Instead of just focusing on quantitative targets in monetary policy, he said China should perfect its credit structure and consider liquidity outside the banking system. His comment came two days after Premier Wen Jiabao signalled a subtle shift in China's monetary stance while reiterating that combatting inflation remains the priority. Talk that China could soon shift its policy stance was repeated in the official China Securities Journal on Thursday. In a front-page editorial, it said "China's macro policy fine-tuning has started and more policies may come gradually."
Comments
Comments are closed for this article.