PRUDENT POLICY
The central bank has limited the volume of credit commercial lenders by raising their reserve requirements and imposing quotas.
Banks are required to lend less for keeping policy tight. To play it safe, banks prefer lending money to big state-owned enterprises.
Unfortunately, some small-and-medium-sized enterprises (SMEs) in China have to face a bind between high inflation and a lack of financing stemming from the government's effort to combat those same price rises, as China enters its 10th month of monetary tightening in July.
Some of them have turned to the underground lending market for re-injecting cash, where the interest rates are more than 10 times of the bank's lending.
Surging borrowing costs are biting profit margins that have already been thin, forcing firms to either close or cut production, though they can get more orders.
"Money shortages and financing difficulties for SMEs can hardly be solved by central bank's monetary policy - we have to tighten the quantitative supply when taming inflation," said central bank governor Zhou Xiaochuan on Friday.
Guo Shuqing, chairman of China Construction Bank (CCB), the second largest bank in the world by market capitalization, said that banks lending less to keep the policy tight will result in small- and mid-sized private businesses increasingly finding themselves in a bind, which will be hard to avoid.
Guo made the remarks on Wednesday when attending the IEA's World Congress.
"The government's top priority is to curb inflation, and this is what Premier Wen Jiabao has said," Guo added.
MONETARY POLICY OBJECTIVES
China will not adopt inflation as its only monetary policy objects, and China's monetary policy has four objectives, said Zhou Xiaochuan on Friday when attending IEA' s world congress.
"Apart from controlling inflation, other long-term objectives include keeping economic growth, creating high employment and keeping the balance of international payments," said Zhou.
The NBS will release China's GDP growth data of the first half year on July 13. Analysts believe that the GDP growth for the second quarter of the year will be lower than 9.7 percent of the first quarter.
Gliding growth and climbing prices is testing China's economy and the macro-economic policy.
In mid-June, global financier George Soros predicted a possible hard landing for Chinese markets due to a significant increase in supply offset by falling demand. However, China's regulatory authorities have managed the situation well thus far, according to Soros.
A hard landing in the business cycle is an economy rapidly shifting from growth to slow-growth to flat as it approaches a recession, usually caused by government attempts to slow down inflation. It is distinguished from a soft landing, in which an economy's growth rate slows enough to control inflation but remains high enough to avoid recession.
Harvard economist Perkins told Xinhua there is no need to worry about a hard landing, however, China's government should focus on slowing down the economy.
Wu Jinglian, the 81-year-old preeminent Chinese economist, said that there is a possibility for China to suffer a hard landing, but it can be avoided through focused efforts.
Wu suggested that China's economy depend less on short-term policy adjustment and concentrate more on transforming the pattern of economic development.
Yu Yongding, an academician with Chinese Academy of Social Sciences (CASS), said that China's economy will and has to slow down by accelerating the transform of structure.
"Also, inflation will slow down in the second half of the year as a result of macro adjustment policy," Yu said.
China's economy has to keep alert to combat shocks from outside, such as the debt crisis of European countries and the United States, Yu added.
Weekly review
The central bank has limited the volume of credit commercial lenders by raising their reserve requirements and imposing quotas.
Banks are required to lend less for keeping policy tight. To play it safe, banks prefer lending money to big state-owned enterprises.
Unfortunately, some small-and-medium-sized enterprises (SMEs) in China have to face a bind between high inflation and a lack of financing stemming from the government's effort to combat those same price rises, as China enters its 10th month of monetary tightening in July.
Some of them have turned to the underground lending market for re-injecting cash, where the interest rates are more than 10 times of the bank's lending.
Surging borrowing costs are biting profit margins that have already been thin, forcing firms to either close or cut production, though they can get more orders.
"Money shortages and financing difficulties for SMEs can hardly be solved by central bank's monetary policy - we have to tighten the quantitative supply when taming inflation," said central bank governor Zhou Xiaochuan on Friday.
Guo Shuqing, chairman of China Construction Bank (CCB), the second largest bank in the world by market capitalization, said that banks lending less to keep the policy tight will result in small- and mid-sized private businesses increasingly finding themselves in a bind, which will be hard to avoid.
Guo made the remarks on Wednesday when attending the IEA's World Congress.
"The government's top priority is to curb inflation, and this is what Premier Wen Jiabao has said," Guo added.
MONETARY POLICY OBJECTIVES
China will not adopt inflation as its only monetary policy objects, and China's monetary policy has four objectives, said Zhou Xiaochuan on Friday when attending IEA' s world congress.
"Apart from controlling inflation, other long-term objectives include keeping economic growth, creating high employment and keeping the balance of international payments," said Zhou.
The NBS will release China's GDP growth data of the first half year on July 13. Analysts believe that the GDP growth for the second quarter of the year will be lower than 9.7 percent of the first quarter.
Gliding growth and climbing prices is testing China's economy and the macro-economic policy.
In mid-June, global financier George Soros predicted a possible hard landing for Chinese markets due to a significant increase in supply offset by falling demand. However, China's regulatory authorities have managed the situation well thus far, according to Soros.
A hard landing in the business cycle is an economy rapidly shifting from growth to slow-growth to flat as it approaches a recession, usually caused by government attempts to slow down inflation. It is distinguished from a soft landing, in which an economy's growth rate slows enough to control inflation but remains high enough to avoid recession.
Harvard economist Perkins told Xinhua there is no need to worry about a hard landing, however, China's government should focus on slowing down the economy.
Wu Jinglian, the 81-year-old preeminent Chinese economist, said that there is a possibility for China to suffer a hard landing, but it can be avoided through focused efforts.
Wu suggested that China's economy depend less on short-term policy adjustment and concentrate more on transforming the pattern of economic development.
Yu Yongding, an academician with Chinese Academy of Social Sciences (CASS), said that China's economy will and has to slow down by accelerating the transform of structure.
"Also, inflation will slow down in the second half of the year as a result of macro adjustment policy," Yu said.
China's economy has to keep alert to combat shocks from outside, such as the debt crisis of European countries and the United States, Yu added.
Weekly review
