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China must keep macro-economic policy stable, flexible, says deputy central bank governor

06-26-2010 16:00 BJT

SHANGHAI, June 26 (Xinhua) -- China should maintain a stable and sustainable monetary and fiscal policy, and also leave room for necessary policy restructuring, deputy governor of the nation's central bank said on Saturday.

"We should keep the policy flexible and leave room for adjustment," said Yi Gang, deputy governor of the People's Bank of China, or the central bank.

"If one country's currency is tightly pegged with another, its exchange rate will lose flexibility," Yi told a financial forum held in Shanghai.

He noted that "the rigid marco-economic policy included zero interest rate and exorbitant deficit to GDP ratio which could squeeze room for policy readjustment."

Reckless government spending has resulted in the European sovereign debt crisis in the wake of the global financial crisis, he said. It is a lesson that China should draw from, he added.

Chinese officials have pledged to extend the relatively easy monetary policy and proactive fiscal policy to keep the economic recovery on track.

Analysts wrongly thought that an interest rates hike would come in second quarter as the economy slowed.

China's central bank announced on June 19 that it will make the yuan more flexible but ruled out a one-off revaluation.

 

Editor:Zhang Pengfei |Source: Xinhua

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