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Wen pledges fine-tuning to keep economy strong

10-26-2011 09:37 BJT

Chinese Premier Wen Jiabao said yesterday that the government will "fine-tune" its macroeconomic policies and maintain "reasonable" credit growth after economic expansion slows and inflation eases.

The comments indicated the authorities may temporarily stop further tightening, such as hikes in interest rates. But an immediate policy easing in all sectors is unlikely to prevent a rebound in inflation, market watchers said.

"We will fine-tune our policy at an appropriate time and by an appropriate degree," Wen told an economic summit in Tianjin, which was attended by top government officials from the municipality, Inner Mongolia Autonomous Region, Shandong and Jiangsu provinces.

Although still stressing the importance of controlling inflation, Wen noted that lending growth should be sustained to "focus on developing the real economy," while policies must reflect "the changing trend of the economic growth."

At the summit, provincial government officials and company executives expressed concerns that capital-strapped small firms in China are facing pressure from slowing exports and tight bank lending, in addition to higher raw material prices.

In response, Wen said that China should take measures such as "structural tax cuts" and public housing construction to promote stable economic growth. He added that a major lesson of the 2008 global financial crisis is that countries should focus on developing their real economies.

"By focusing on developing its real economy, China can cut its exposure to financial bubbles and fluctuations in international markets," Wen said. "China should focus on boosting innovation. Start-up firms with innovative ideas should have their taxes cut."

China's inflation eased for a second straight month in September, making way for a possible adjustment in policies supportive of growth, analysts said. The central bank has lifted benchmark interest rates five times since last October.

The Consumer Price Index increased 6.1 percent from a year earlier last month. That was down from August's 6.2 percent and the 37-month high of 6.5 percent in July.

"The Premier's comments indicate further tightening may be put on hold, though an across-the-board policy easing is impossible at this moment," said Liu Yu, an Orient Securities Co trader. "We can expect more pro-growth policies in the next few months."

Gross domestic product expanded 9.1 percent from a year earlier between July and September, compared with 9.5 percent in the second quarter. But new bank lending in September dropped to its lowest level in 21 months, down to 470 billion yuan (US$73.8 billion).

Editor:Zhang Jianfeng |Source: Shanghai Daily

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