China to continue tight monetary policy: PBOC

BEIJING—The People’s Bank of China (PBOC), the central bank, said on Monday that the country would continue with its tight monetary policy, which would be adjusted in response to changes in the domestic and world economies. According to a circular on the PBOC website, the regular first-quarter monetary policy committee meeting decided that the economic and financial situations were stable.
The consumer price index (CPI) increased by 8.7 percent year-on-year in February, the biggest jump in nearly 12 years and well above the annual target of 4.8 percent set by the central government for 2008. Domestically, the country faced pressure from a resurgence in fixed asset investment, excessive credit supply and liquidity, according to the central bank.
As the credit crisis deepened, the uncertainties and risks of the global economy were on the rise, said the committee. Credit preference would be given to relatively weak sectors including agriculture, employment, education and small and medium-sized enterprises.
The central bank will continue improving the exchange rate regime “in a pro-active, manageable and and gradual manner” while allowing the market to play a bigger role in determining the rate. It would also introduce more flexibility to the renminbi exchange rate and keep it stable at a reasonable and balanced level, said the central bank. Reform of the foreign exchange management regime should also be improved, said the committee.
Chinese shares slumped 3 percent on Monday after securities regulators failed investors’ expectation that they might introduce stimulus measures. The benchmark Shanghai Composite Index shed 107.43 points from the previous close to 3,472.71. The Shenzhen Component Index fell 390.71 points, or 2.85 percent to 13,302.14.
The major stock index rebounded by 4.94 percent last Friday on market talk that the securities watchdog might announce a stamp duty cut or unveil the timetable for the launch of stock index futures over the weekend to stem further declines. Investors were disappointed to find no such moves taken at the weekend, which made worries on the market worse, said analysts.
Reports on Sunday said the China Securities Regulatory Commission had urged fund companies to stay cool amidst market changes and stick to long-term investment to help maintain stability of the capital market. The Chinese government will make efforts to promote stable and sound development of its stock market, said Chinese Premier Wen Jiabao when visiting Laos on Sunday.
Losers outnumbered winners on Monday by 726 to 65 in Shanghai and by 570 to 49 in Shenzhen. Aggregate turnover shrank sharply to97.4 billion yuan from 130.88 billion yuan last Friday.

—Xinhua