China's economic objective in 2012 will be to seek relatively fast growth while maintaining stable consumer prices, said a government statement issued yesterday, wrapping up the three-day central economic work conference.
China's economic objective in 2012 will be to seek relatively fast growth while maintaining stable consumer prices, said a government statement issued yesterday, wrapping up the three-day central economic work conference.
"The theme of next year's economic and social development is to make progress while maintaining stability, which means to maintain basically steady macro-economic policy, relatively fast economic growth, stable consumer prices and social stability," the statement said.
The country will preset or fine-tune monetary policy according to changes in economic development, harness multiple monetary policy tools and maintain a "reasonable increase" in money and credit supply.
It will deepen interest and exchange rate formation mechanism reforms, with the exchange rate of the yuan to be kept "basically stable."
Late last month, the People's Bank of China announced the first cut in the deposit-reserve ratio for commercial banks in three years, after 12 consecutive raises of the ratio to curb inflation.
Growth of the consumer price index (CPI)， a main gauge of inflation, eased to 4.2 percent in November from a July peak of 6.5 percent.
However, the CPI from January to November still showed a 5.5 percent growth year-on-year, well above the government's full-year inflation control target of 4 percent.
Meanwhile, the country's economic growth slowed to 9.1 percent in the third quarter from 9.7 and 9.5 percent respectively in the first two quarters.
The purchasing managers index, a gauge to measure manufacturing activity, also contracted in November for the first time in 33 months, fuelling concerns the economy is facing a hard landing.
In an e-mail to the Global Times, Lu Ting, a Hong Kong-based economist with Bank of America, said maintaining growth was still the top priority for next year, despite no explicit confirmation in the statement.
"Stability is the key word for policymaking in 2012. With rising external risks and an already stabilized inflation, this memo is definitely more pro-growth," Lu wrote.
Compared with 2011, fiscal policy in 2012 will be more proactive by stepping up spending on social welfare and proceeding with tax cuts while monetary policies will be eased on the margin, Lu said, adding that "structural reforms may take a back seat."
"It seems the government, at least for now, is not ready to conduct a blanket policy relaxation," Tang Yunfei, an economist with Founder Securities in Beijing, told Reuters.
"But it also made clear that the policies will be flexible, which means the government will react when slowdown trends are clear," Tang said.
Zhuang Jian, a senior economist with the Asian Development Bank (ADB)， predicted the reserve requirement ratio is very likely to be lowered again in January given the current shortage of liquidity and outflow of foreign capital, coupled with dim trade prospects.
"But I think the government would be vigilant in adjusting interest rates, because this could bring about a great impact on the economy," Zhuang told the Global Times, citing risks of inflation triggered by rising labor costs among other factors.
"The CPI figure may rebound next year if the issue is not properly handled," he warned.
China's economy is expected to grow by 8.9 percent next year, the Chinese Academy of Social Sciences said last week, with the ADB earlier projected at an 8.8 percent growth.
Zhuang agreed with the predictions and ruled out the possibility of a hard landing.
"Economic growth between 8 and 9 percent is acceptable. The government has put up measures to both boost domestic demand and address declining external demand to offset the negative impact of the bleak economy in the West," Zhuang said.
Yesterday's statement cautioned "the trend in the global economy on the whole is grim and complicated."
It vowed to expand domestic demand next year and increase income levels, especially for disadvantaged groups.
Meanwhile, the government will maintain its regulation policies on the property market to return housing prices to reasonable levels and push forward trials of property tax reform, the statement said.
Over the past 18 months, the government has imposed strict restrictions.
In October, 34 cities in a statistical pool of 70 major cities saw declines in new home prices, compared with 17 in September, National Bureau of Statistics data revealed.
Some economists have argued falling transactions and prices could stall new construction in an economy that relies on the sector to drive overall growth.
Zhuang said yesterday's statement showed Beijing's determination to cool the property market.
"The tight control is set to be sustained for a while to squeeze bubbles out of the market, and massive nationwide construction of affordable housing has to catch up with the tight control over commercial housing, so as to maintain the rigid demand in the process of urbanization," Zhuang said.
