UPDATE 1-China’s economy, inflation trend stable- c.bank

by on September 25, 2012 10:09 am GMT

Tue Sep 25, 2012 6:09am EDT

* Says to “fine-tune” monetary policy to support growth

* Says to guide steady money supply and credit growth

* Signals concerns over policy loosening in the West

BEIJING, Sept 25 (Reuters) – China’s central bank said on
Tuesday that it will “fine tune” policy to cushion the economy
against global risks while closely watching the possible impact
from recent policy loosening in the United States and Europe.

“We will continue to implement prudent monetary policy, make
policies more targeted, flexible and forward-looking, while
fine tuning policy according to the economic situation,” the
central bank said in a statement after its third-quarter
monetary policy meeting.

“We will use various policy tools to guide the steady and
appropriate growth in money and credit and maintain reasonable
social financing aggregate,” the central bank said, adding that
it will improve financial resource allocation and resolve the
structural distortions in credit supply and demand.

Many smaller Chinese firms, the key driver of economic
growth and job creation, remain starved for cash as commercial
banks still favour large, state-backed companies.

China’s economy has showed signs of stabilsing while the
trend of inflation remains stable, the central bank said in the
statement posted on the bank’s website: (www.pbc.gov.cn).

“The current economic and financial performance shows signs
of stabilising and the price situation is basically stable,” it

“Global economic growth remains weak and we need to closely
watch the impact of recent rescue and stimulus measures taken by
European countries and the United States.”

Across Asia, central banks are wary about the potential
inflationary impact of the Federal Reserve’s latest quantative
easing, dubbed QE3, as well as policy stimulus unveiled by the
European Central Bank.

Under the banner of policy ‘fine-tuning”, China’s central
bank cut interest rates twice in June and July and lowered
banks’ reserve requirement ratio (RRR) three times since late
2011, freeing an estimated 1.2 trillion yuan for boosting loans.

But it has refrained from cutting interest rates or RRR
since July, despite further signs that demand at home and abroad
is cooling. Instead, it has opted to inject short-term cash via
its open market operations into money markets to ease credit

Housing prices rebounded on a monthly basis for the second
straight months in July, following eight consecutive months of
declines, while annual inflation accelerated to 2 percent in
August from a 30-month low of 1.8 percent in July.

But analysts still expect further policy easing in the
coming months as the global economy remains sluggish and
Europe’s debt crisis drags on.

The government also appears to be leaning more on fiscal
policy to support growth.

Earlier this month, the National Development and Reform
Commission (NDRC), the top economic planning agency, approved
over $150 billion worth of infrastructure projects to cushion
the economy against stiff global headwinds.

The central bank also said it will continue to promote
two-way moves in the yuan exchange rate