Chinanews, Beijing, February 14 – The People's Bank of China, the central bank of China, recently published its report on monetary policies in the fourth quarter of 2006, in which it admitted increasing inflation pressures in China for the first time ever.

 

The imbalance of payment, the drop of investment and the fall of credit have all contributed to current inflation.

 

In last December alone, CPI increased by 2.8%, a new high in the last 20 months, while the figure in last November was an amazing 1.9%.

 

According to the survey by the People's Bank of China among urbanites, the responders are not optimistic about the price levels in the near future. In fact, the price levels in the domestic market are expected to make a new record since 1999.

 

The People's Bank of China will implement more solid monetary policies to enhance macro control over the financing market, especially over the rise of credit, to guarantee the goal of increasing GDP by 8% and maintaining price level growth under 3%. The money supply, M2, is expected to increase by 16%.

 

In 2007, the People's Bank of China will work hard to improve liquidity management to provide a better financing environment for economic development. Special attentions will be paid to the marketization of exchange rate, thus it will work better as a price lever. The formation mechanism of the exchange rate of RMB will be enhanced, too, as it will be the ultimate way to regain balance of payment. The optimization of credit structure is another important goal in 2007. Besides, the central bank is confident in pushing forward the exchange rate reform and gaining a better control over foreign currencies.

 

It is estimated that there will be an interest rate hike in China, according to the attitude of the People's Bank of China.