Wen signals possible relaxation of credit


AFP

SHANGHAI–China’s stock market received a boost Wednesday after Premier Wen Jiabao said the government might “fine-tune” economic policy, raising hopes of a relaxation of tight credit. Worried by surging inflation, China has ushered in several policies over the past year to tighten credit, including restricting the amount of money banks can lend and hiking interest rates five times since October 2010. Visiting the northern port city of Tianjin on Tuesday, Wen repeated that controlling prices was a key task but he also said the government could adjust economic policy when the time was right. “We must control the strength, rhythm and emphasis of macroeconomic policy, pre-emptively adjusting and fine-tuning at an appropriate time to an appropriate degree,” the official Xinhua news agency quoted Wen as saying. He added the government would maintain “appropriate” increases in money and credit, but gave no details. “This is a game-changer to Wen’s thinking as far as macro policy is concerned,” Credit Suisse said in a research report.

“We take Wen’s remarks as a hint for selective and measured easing.” Possible moves may include cutting the proportion of funds that banks are required to place in reserve, it said. China’s key Shanghai stock index closed up 0.74 percent Wednesday after investors seized on the news, the third straight session of gains, though the market had been up more than 1 percent earlier. “What Wen said had some impact on a psychological level, but I think we should still be cautious to see whether something more concrete will emerge,” Li Bin, an analyst at Guolian Securities, told AFP. The premier also repeated remarks about controlling China’s stubbornly high inflation, the second time in a week. High inflation has persisted in China despite government moves to rein in soaring food and housing prices, which officials fear could spark social unrest as citizens grow angry at higher costs. The benchmark consumer price index rose 6.1 percent year-on-year in September, slowing only marginally from a 6.2 percent rise in August and retreating from a more than three-year high of 6.5 percent in July.