"In January and February this year, the CPI (Consumer's Price Index) increased by 2.9 percent, and ex-factory price of the means of production among industrial products released by the National Bureau of Statistics in February was up 7.2 percent from that in the same period last year. Due to the upward trend of the prices of raw and processed materials, land and labor, as well as to the transmission of the price-hike pressure from the upstream products to downstream products, the pressure of price rise in the whole year will increase. However, according to the current situation, the rate of price hike can still be controlled within the estimated value of 4 percent," said Wu Xiaoling, deputy governor of People's Bank of China. Wu made the remarks at the recent Experts' 2005 Annual Meeting of forecasting, analyzing and looking forward into China's financial situation.

Wu said that the overall situation of monetary and credit supply and economic operation remained stable in the first two months of this year. The broad money (M2) supply recorded an increase of 13.9 percent from that in the same period last year. The Renminbi loans were up 13.4 percent from last year, and the mid- and long-term loans accounted for 46.7 percent of the various loans or a year-on-year increase of 4.5 percentage points, but were 13.8 percentage points lower than last year as a whole, structural adjustments were made. Also in the first two months this year, urban fixed assets investment increased by 24.5 percent year on year, and the investment in real estate development was up 27 percent from, with lower growth rate than, the same period last year, but was still operating at a high point. People's Bank of China will make comprehensive use of various monetary policy instruments this year, striving to keep monetary credit at a steady growth.

Wu added that People's Bank did a lot of work in the marketizing interest rates last year. Meanwhile, People's Bank also controlled the interest-rate difference between deposits and loans and the interest rates of some special deposits and loans. This is due to the commercial bank's incomplete self-restraint mechanism, the income from interest-rate difference is still a major source of profits for commercial banks. The objective of market-oriented reform of interest rates is that the central bank only controls the benchmark interest rates, and hands the power of controlling interest-rate difference between deposits and loans to commercial banks.

By People's Daily Online