CHINA'S central bank will ensure reasonable lending growth to support economic stability with policy fine-tuning when necessary although it will maintain a prudent monetary policy stance, top banker Zhou Xiaochuan said at the Lujiazui Forum in Shanghai yesterday.
"Our economic and financial conditions are stable on the whole at the moment," the central bank governor said. "Together with tamed inflation, they show that the current prudent monetary policy stance is appropriate."
Zhou said policies would be kept flexible, targeted and forward-looking because financial markets usually responded quickly to changes in the economy.
"We will guide financial institutions to maintain reasonable lending to support the real economy while keeping market liquidity at a suitable level for stable operating conditions in the financial market," he said.
The central bank was said to be worried about risk from a boom in credit, but on Tuesday confirmed it had offered liquidity "support" to financial institutions and pledged to provide more if needed.
That statement marked an apparent change of course after it earlier ruled out providing fresh funds and ordered banks to put their financial houses in order. For three weeks, funds have been in short supply on China's interbank market, and the interest rates banks charge to lend to each other surged to record highs last week before easing again.
"Our money supply is increasing at a steady pace although it is slowing a bit," Zhou said. "It will create an amiable growth environment for China's economy, along with the spillover effects of our reforms in governance and economic restructuring. We are confident about China's future economy."
He pledged that China would push forward with economic reforms, including moving toward freeing up capital flows in and out of the country.
Zhou expressed confidence about Shanghai's future as a global financial center.
"The process may take many efforts and much time," Zhou said, "but we should see favorable conditions including China's sound economic growth, the fast development of China's industries of modern services, advanced manufacturing and strategic emerging industries."
Zhou suggested Shanghai take advantage of the accelerating evolution of the yuan into an international currency, and make use of the city's status as a hub of regional headquarters for many financial multinational companies.
"Shanghai's financial market should open up further to more investors from both home and abroad. With their help, we can jointly build up a multi-tier financial market regime," Zhou said.
Shanghai Mayor Yang Xiong, co-chair of the forum along with Shang Fulin, chairman of the China Banking Regulatory Commission, said the city will step up efforts in the construction of a global financial center.
"Shanghai has made visible progress in recent years through the launch of a large number of financial products and tools," he said. "Next, Shanghai will make the market more inclusive, creating a multi-level market structure and allowing more participants."
Yang said Shanghai has applied for the pilot program to allow convertible capital account in its free trade experimental zone, which may provide more freedom for transactions of financial assets in the city.
The Lujiazui Forum, named after the financial district known as Shanghai's Wall Street, was launched in 2008 and has grown into a platform for global discussions on finance, the economy and the city's growth.
