China central bank focus on inflation, not growth

TOKYO - Agence France—Presse

Bank of China Deputy Governor Yi Gang, delivers a speech at a seminar at the IMF and World Bank Group annual meeting in Tokyo on Oct 14. AFP photo

China’s deputy chief central banker said on Oct.14 his top priority is to control inflation, despite calls by developed economies to ramp up consumer demand and domestic pressure to chase growth.

“The first thing... is (to) control inflation is our number-one job. As a central banker, we have to control inflation,” Yi Gang, deputy governor of the People’s Bank of China told delegates to the annual meetings of the International Monetary Fund and the World Bank in Tokyo.

Yi stepped in to deliver the speech when his boss, bank governor Zhou Xiaochuan pulled out. He and Finance Minister Xie Xuren stayed away as part of what observers said was a protest over a territorial row with Japan.

Regional economies

“Leaders of local governments are eager to develop the economy in their regions. So everybody is enthusiastic about development and they want investment, they want to have FDI (foreign direct investment).

 “Desire for higher growth is all over the country,” he said.

“As a central banker, you have to constantly remind the whole country, the central government as well as local governments... (of) the danger of inflation.” Yi argued that the value of the yuan was “close to the equilibrium rate” set by the market, with Beijing authorities refraining from direct intervention in recent quarters.

Critics argue China keeps its currency artificially low to give its exports a competitive edge.

Yi said China has to reform its ways “gradually” as it opens its economy to market-oriented principals.
 When asked the scope of the next round of stimulus, Yi only said: “large enough to stabilize growth, but not too large to cause further negative impact, problems.” Yi added that China was not promoting internationalization of the yuan, also known as renminbi, but has liberalized its use for the market.
“I think the central bank’s, or my attitude, is that internationalization of renminbi is entirely market-driven phenomenon,” he said.

“In the past, China restricted using renminbi. That’s not fair. What the central bank did was to remove barriers for using renminbi.” “If our trade partners and investment partners like using renminbi, why not?”