- BEIJING: China must rein in money supply and boost the availability of consumer goods to help tame inflation instead of resorting to administrative measures to control prices, an adviser to the central bank said in remarks published on Tuesday.
To curb three-year high inflation in June, China’s top economic planner recently issued a series of orders to prevent merchants from raising prices of consumer products, ranging from instant noodles to shampoo to Chinese herbs.
But Zhou Qiren, an academic member of the central bank’s monetary policy committee, said that the root cause of inflation in China was excessive money issuance in the past.
“Therefore, our anti-inflation policy is actually very simple — resolutely and steadily shrink money supply and increase production,” Zhou said in an article published in the official People’s Daily.
The central bank, which aims to steer money supply growth to a slower 16 percent, has taken a series of steps to tighten monetary conditions, including repeated rises in banks’ required reserves and interest rates.
Lending and money growth have slowed steadily in recent months in response to the tightening steps after an extraordinary surge in bank credit in 2009 to counter the global financial crisis.