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China's leaders set economic priorities for 2012

13 december 2011, 15:47
China's President Hu Jintao (3rd L, front row), Premier Wen Jiabao (2nd L, front row) and Vice President Xi Jinping (R, front row). ©Reuters
China's President Hu Jintao (3rd L, front row), Premier Wen Jiabao (2nd L, front row) and Vice President Xi Jinping (R, front row). ©Reuters
China's top leaders opened a three-day meeting on Monday to set out the country's economic priorities for 2012 as turmoil in Europe and the United States dampens growth in the world's second economy, AFP reports.

The closed-door Central Economic Work Meeting is the last major economic policy gathering before China's senior leaders step down from their party posts in a once-in-a-decade transition of power that begins next year.

The ruling Communist party said ahead of the meeting that China would implement a "prudent" monetary policy in 2012, signalling authorities will move cautiously as they ease credit restrictions to prevent a sharp slowdown.

The outcome of the meeting, which is held at a secret location in Beijing and presided over by President Hu Jintao, is likely to be announced Wednesday. Premier Wen Jiabao, in charge of economic policy, will also attend.

China has seen demand for its products shrink in recent months as overseas consumers cut back on spending due to an increasingly bleak economic outlook.

Growth in exports slowed in November while consumer prices rose at their weakest pace in more than a year and industrial output growth hit its lowest level in more than two years, according to official data released last week.

Manufacturing activity contracted in November for the first time in 33 months, fuelling concerns the economy was at risk of a hard landing.

However, IHS Global Insight analyst Ren Xianfang said Chinese leaders had made it clear that there was "no aggressive easing in the pipeline".

"This means that we could see modest acceleration in money supply and new credit, but the likelihood for interest rate cuts is pretty small," Ren said.

Until recently, policymakers have been reluctant to relax tight credit restrictions implemented in the past two years amid fear of reigniting inflation, which peaked at a more than three-year high of 6.5 percent in July.

But late last month, Beijing cut the amount of money banks must hold in reserve for the first time in three years to spur lending and counter turmoil in Europe and the United States that threatens to derail China's economy.

Chinese media said Monday policymakers at the meeting must be prepared to deal with a "weakening domestic economy and volatile external environment" and "take prompt action" if necessary next year.

But the editorial in the China Daily newspaper noted that there was currently "no need to rush" to ease policy as "growth remains in the comfort zone", and it advised "targeted" measures to avoid a resurgence in inflation.

"The conference will likely prioritise a pro-growth stance and a more flexible proactive fiscal policy and prudent monetary police," the paper said.

Concerns that Beijing will move slowly to ease tight credit restrictions weighed on Chinese shares on Monday, with the Shanghai Composite Index closing down 1.02 percent to 2,291.55, the lowest level in 33 months.

China's economy is expected to grow 9.2 percent in 2011 and 8.9 percent next year, which would be the slowest pace in more than a decade, a state-run think tank said last week.

Vice President Xi Jinping is widely expected to replace Hu as party head next year, becoming president in March 2013, while Vice Premier Li Keqiang is in line to take over from Wen.

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