PBOC governor: monetary policy should be in line with economic development

The looseness of China's monetary policy should meet the requirements to assist economic development, to solve the employment issue and to keep the value of Renminbi stable, said Zhou Xiaochuan, governor of the People's Bank of China (PBOC). Low inflation, economic growth, employment increase and balance of international payments are four major issues needed to be taken into consideration.

Zhou noted that developed countries generally can accept inflation of around 2 percent. However, developing countries and restructuring countries can accept slightly higher inflation rate.

As to the public discussions on the country's monetary policy, Zhou said that the time lag of monetary policy always exists, and that they were trying to make predictions based on current information. Conduction mechanism of monetary policy was also considered when they made adjustments to the policy, noted Zhou.

"The effectiveness of policy conduction differs from time to time and from country to country," he explained. "The central bank's policies have to go through commercial banks and financial institutions to enterprises and then to the real economy. The effectiveness of policy conduction is an important factor that decides the effect of the central bank's monetary policy."

In the first eight months this year, new Renminbi loans totaled 8.15 trillion yuan. Surging credit has supported China's economy and also sparked economists' concern about inflation. PBOC, China's central bank, has reiterated that China would maintain the "moderately loose" monetary policy, and that dynamic minor adjustments need to be made according to domestic and foreign economic trends and price changes.