SHANGHAI, Nov. 30 (SMM) -- China's annual Central Economic Work Conference for 2012 is just around the corner. The conference will summarize economic achievements in 2011 and will make plans for macroeconomic development and economic work for next year. In 2012, the inflation pressure is expected to ease, while economic growth will face increasing challenges, which will affect the monetary policies next year.
China will continue to implement positive financial and steady monetary policies. It is expected that monetary policies in 2012 will loosen compared to that in 2011. The macro regulations in 2012 will focus on balanced development between structure adjustment, steady growth and goods prices control, with structure adjustment more import than in 2011.
First, government aims to maintain stable economic growth. In 2012, China’s macro policies will focus on stability. The positive financial and steady monetary policies will remain unchanged, while structure optimization should be achieved so as to promote fast and steady economic growth. The economic growth rate in 2012 is expected to be 8%, while the price increase limit may be 4%. A lower than 9% growth rate in China will be acceptable even if global economy slips into double-dip recession in 2012. Meanwhile, a 4% price increase limit provides certain room for resource product price reform if actual price increase is lower that regulation target.
Second, government aims to maintain a balance between goods price control and steady economic growth. Capital pressure will be felt in most companies before the year end. However, the Chinese central bank may loose deposit reserve requirements in early December. Once such loosening measure is carried out, it will be a shift of direction for China's macro regulation. The Chinese central bank also disclosed in its monetary policy report for the third quarter that its monetary polices will be pre-tuned and fine-tuned at times appropriate. The launch of monetary policy “pre-tuning and fine-tuning” for the fourth quarter does have its reasons. According to China's National Bureau of Statistics, the country’s Consumer Price Index gained 5.5% on a yearly basis in October, comparing with a yearly gain of 5% for the Producer Price Index. Producer purchase prices slipped 0.7% from the previous month and gained 8% YoY. These indexes have dropped as expected. The CPI growth not only saw a remarkable drop but will also slow on a monthly basis. The PPI index dropped after commodity prices slipped. Faster than expected drops in prices and slowing economic growth are quite likely to restart loose monetary polices in China.
Third, the government aims to prevent financial risk. China's Vice Premier Wang Qishan stressed on a local finance work conference held on November 19 in Yichang City in Hubei Province that China’s financial system should hold on to the main thread of transforming economic development mode and adjusting economic structure, as well as executing a sound and stable monetary policy under the severe international economic situation and a possible recession triggered by the international financial crisis. It’s worth noticing that the financial risk caused by the falling property market has become market focus. There have recently been reports about high inventories in the property sector, and house prices have begun to fall. It’s predicted that future house prices will fall more quickly and may decline below the construction cost. Small- and medium-sized real estate companies will face tightness in cash availability and sales losses at the same time, and closures or reorganization will be unavoidable. The Central Economic Working Conference is expected to propose to ward off financial risks ignited by these problems.
Fourth, the government aims to gradually implement industry plans. Several industry plans have been introduced since early October this year, According to statistics, different departments of the Central Government have recently introduced a set of suggestions and industry plans concerning culture, energy saving and environmental protection, the steel industry, electronic certification service industry and other industries. The 12th Five-Year Plan has made policy guidance on the equipment manufacture industry, the marine industry, automobile industry, metallurgy and building material industry, petrochemical industry, textile industry, packaging industry, information and electronics industry and building industry.