Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200810/20081027/article_378383.htm
Zhou warns of fallout despite solid economy
Created: 2008-10-27 1:42:38
CHINA must prepare for challenges sure to be brought about by the global financial crisis, although the nation's economy was generally in good shape, central bank Governor Zhou Xiaochuan said yesterday.
Reporting to the Standing Committee of the National People's Congress on China's prospects in the face of the worst financial crisis in 80 years, Zhou struck a balance between confidence and caution.
He told the nation's top legislature that China's economy was developing as expected, but the world economic slowdown added uncertainty.
"We must not underestimate the impact on our economy," he said. "The economy's basic momentum has not changed.
"But in order to confront the many destabilizing and uncertain factors that exist, it is necessary to strengthen our awareness of the dangers, pro-actively cope with the challenges, and do a solid job of preparing to face potential difficulties.
"Our economy is highly reliant on overseas demand," he said. "Slackening exports resulting from the global economic slowdown would have a negative impact on the economy."
After years of straining to meet demand for its exports, China is grappling with slowing orders as consumers in the United States and Europe cut back on spending.
Zhou said the People's Bank of China would adopt flexible and prudent macro-economic control policies to strive for the stability of the financial sectors and promote sound and rapid economic growth.
He said the central bank would strengthen supervision of China's banks and develop contingency plans to deal with any negative impact from the global crisis.
The PBOC would work to maintain a sufficient supply of credit on the domestic market, he said.
Zhou told law makers that the central bank would let the market play a "bigger role" in deciding upon interest rates and keeping exchange rates stable.
He said efforts would go to other fields, including establishing a financial-risk monitoring mechanism, enhancing cooperation among domestic and overseas financial organizations, and ensuring liquidity in the banking system.
He also called for strengthening of foreign-exchange management through enhancing cross-border, capital-flow management and supervision in a bid to avoid losses and risk generated by speculation.
Zhou said the central bank would keep a close eye on the real estate sector and improve financial services in this area after authorities announced last week measures to revive the weakening housing market.
Property accounts for about 10 percent of economic activity in China and has wide repercussions for many other industries.
Zhou said China needed to be cautious in adjusting policies because there was the possibility of fluctuating prices. "Currently, inflation pressure mainly comes from rising costs," he said.
However, the global trend was to shift policies from curbing inflation to boosting economic development.
Zhou also foreshadowed a new round of increases in international commodity prices.
Reporting to the Standing Committee of the National People's Congress on China's prospects in the face of the worst financial crisis in 80 years, Zhou struck a balance between confidence and caution.
He told the nation's top legislature that China's economy was developing as expected, but the world economic slowdown added uncertainty.
"We must not underestimate the impact on our economy," he said. "The economy's basic momentum has not changed.
"But in order to confront the many destabilizing and uncertain factors that exist, it is necessary to strengthen our awareness of the dangers, pro-actively cope with the challenges, and do a solid job of preparing to face potential difficulties.
"Our economy is highly reliant on overseas demand," he said. "Slackening exports resulting from the global economic slowdown would have a negative impact on the economy."
After years of straining to meet demand for its exports, China is grappling with slowing orders as consumers in the United States and Europe cut back on spending.
Zhou said the People's Bank of China would adopt flexible and prudent macro-economic control policies to strive for the stability of the financial sectors and promote sound and rapid economic growth.
He said the central bank would strengthen supervision of China's banks and develop contingency plans to deal with any negative impact from the global crisis.
The PBOC would work to maintain a sufficient supply of credit on the domestic market, he said.
Zhou told law makers that the central bank would let the market play a "bigger role" in deciding upon interest rates and keeping exchange rates stable.
He said efforts would go to other fields, including establishing a financial-risk monitoring mechanism, enhancing cooperation among domestic and overseas financial organizations, and ensuring liquidity in the banking system.
He also called for strengthening of foreign-exchange management through enhancing cross-border, capital-flow management and supervision in a bid to avoid losses and risk generated by speculation.
Zhou said the central bank would keep a close eye on the real estate sector and improve financial services in this area after authorities announced last week measures to revive the weakening housing market.
Property accounts for about 10 percent of economic activity in China and has wide repercussions for many other industries.
Zhou said China needed to be cautious in adjusting policies because there was the possibility of fluctuating prices. "Currently, inflation pressure mainly comes from rising costs," he said.
However, the global trend was to shift policies from curbing inflation to boosting economic development.
Zhou also foreshadowed a new round of increases in international commodity prices.
Agencies/Shanghai Daily
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