People's Daily puts central bank official on policy defensive
Central bank vice-governor Su Ning yesterday defended Beijing's macroeconomic controls despite a front-page article in the People's Daily calling for policy adjustments to ward off stagflation and prevent a damaging economic slowdown.
The disagreement is the latest sign of confusion in the upper reaches of the government about the best way to keep the mainland economy on course amid rising prices and slowing export growth.
'The economy in the first half developed smoothly in accordance with the macroeconomic controls put in place at the start of the year,' Mr Su said yesterday.
'We can make a reasoned forecast that the Chinese economy will maintain good momentum in the second half of the year,' he said.
But the People's Daily said Beijing needed to adjust its macroeconomic policies to prevent its fight against inflation from stifling growth.
'The current performance of the economy is sending us a warning signal: when we fight inflation, we should prevent stagflation and an economic hard landing,' the newspaper said on the front page of its overseas edition.
'Curbing inflation should not be at the expense of economic development,' it added.
Economic growth in the mainland fell to 10.1 per cent in the second quarter, a significant fall-off from the 11.9 per cent recorded last year, leading to calls for a loosening of the government's tight monetary policy.
The People's Daily article also suggested that Beijing stabilise the yuan's exchange rate and give fiscal policy a bigger role in steering the world's fourth-biggest economy.
The strengthening yuan, which rose 6.56 per cent against the US dollar in the first half of the year, has made mainland exports more expensive at a time when many exporters are feeling the pinch from softening demand and tighter credit controls.
However, the central bank has stuck to its policy of enforcing quarterly bank quotas in an attempt to control the supply of money, which some economists blame for helping to stoke inflation.
Consumer inflation ebbed to 7.1 per cent in June from a 12-year peak of 8.7 per cent in February but remains almost 3 percentage points above the government's target for the year.
'Prices of goods remain relatively high, with the CPI at 7.1 per cent, but we are now seeing a gradual decline from the high figures in March and April,' Mr Su said.
