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China Continues Tight Monetary Policy to Curb Inflation

The People's Bank of China (PBOC) will continue to implement tight monetary policy to rein in inflation, vice governor Ma Delun said on Thursday.

The central bank had taken a series of measures since last year to absorb excess liquidity and the measures had played an active role in taming inflation, Ma told a seminar in Suzhou, Jiangsu Province.

The PBOC was tightening policies this year by further raising the deposit reserve requirement ratio and conducting more open market operations, he said.

On January 25, the PBOC raised the reserve requirement ratio by 0.5 percentage points to 15 percent, the highest since 1984. Last year, it raised the ratio 10 times and the benchmark interest rates six times.

On Thursday, it issued 115 billion yuan (US$16.1 billion) of central bank bills, lifting the total amount over the past three weeks to more than 400 billion yuan.

Ma believed the measures would slow down inflation growth.

The government decided to shift its monetary policy to "tight" from "prudent" at the 2007 Central Economic Work Conference in December last year, in a bid to prevent evident inflation and economic overheating.

The consumer price index (CPI), the main gauge of inflation, climbed by 7.1 percent in January, up from 6.5 percent in December.

Huge rises in food prices pushed the CPI up 4.8 percent last year, also an 11-year high and well above the government target of three percent.

(Xinhua News Agency February 29, 2008)

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