C
Cao Cao
Guest
China to shift to 'prudent' monetary policy
China will tighten its monetary policy next year, as its government seeks to rein in liquidity and combat inflation which is at a two-year high.
Food price rises saw annual consumer price inflation hit a 25-month high in October at 4.4pc, well above the 3pc target. Photo: AFP/Getty Images
By Szu Ping Chan 9:18AM GMT 03 Dec 2010
The Communist Party's Politburo said that China will shift its monetary policy from "relatively loose" to "prudent", the Xinhua news agency reported.
Recent food price rises saw annual consumer price inflation hit a 25-month high in October at 4.4pc, well above the 3pc target.
China is tightening monetary policy after a record expansion of credit to counter the financial crisis added to inflation and asset-bubble risks.
The shift in monetary policy is also a sign that interest rate rises may be on the way. “Rate hikes are imminent - we expect one by the end of the month, with more to come in 2011,” Brian Jackson, a Hong Kong-based emerging-market strategist at Royal Bank of Canada, told Bloomberg.
Concern that monetary tightening will hamper corporate profit growth has led to a sell-off in China’s benchmark stock in the past month, which has fallen more than 10pc since November 8.
The Shanghai Composite Index closed 0.1pc down on Friday, to 2,842.43.
