UPDATE 1-China to keep policy loose despite price pressure

* China c.bank vows to maintain appropriately loose policy

* Sees upward inflation pressure, also stabilising factors

* Says economic growth to gain steam

BEIJING, Jan 29 (BestGrowthStock) – China’s central bank will ensure
that money and credit growth remain ample in 2010, even though
inflation is likely to rise further, it said in a report on
Friday.

Its reaffirmation that bank loan growth ought to be
reasonable and balanced came at the end of a week in which fears
that China was slamming the door on lending shook markets around
the world.

In a quarterly statistics report, the People’s Bank of China
(PBOC) expressed broad satisfaction with both the state of the
economy and current policy settings, insisting that it would
stick to its “appropriately loose” monetary stance.

It said that consumer price inflation had bottomed out in
the fourth quarter of 2009 and that leading price indicators
were pointing up, meaning that maintaining price stability would
be harder. But it also outlined reasons to be optimistic that
inflation would remain under control.

“Rising international commodity prices, high domestic money
and credit levels, continuous growth in domestic demand and
adjustment of resource prices will place upward pressure on the
overall price level in 2010,” the central bank said.

“Meanwhile, the sixth consecutive year of grain output
growth will play a positive role in stablising food prices.
Overcapacity in some sectors and a sufficient supply of consumer
goods will also help to curb price rises,” it added.

Consumer price inflation picked up to 1.9 percent in
December, its highest in 13 months. Inflation is expected to be
quite mild at 3 percent this year, according to a Reuters poll,
though some analysts believe it could soar to greater heights,
requiring more aggressive tightening by the government.

“Higher policy rates and a stronger currency need to be part
of the package and we expect moves in this direction starting in
the next few months,” Brian Jackson, an economist with the Royal
Bank of Canada in Hong Kong, said in a note about the central
bank’s report.

The central bank said that China’s stunning economic
recovery, from annualised gross domestic product (GDP) growth of
4.3 percent in the fourth quarter of 2008 to an annualised rate
of 11.3 percent in the fourth quarter of 2009, would gain more
steam this year.

“With the stablisation in global economy, the pick-up in
private investment sentiment and stronger corporate
profitability, China’s economic recovery trend will be enhanced
further,” it said.

Reports and rumours of Beijing’s clampdown on bank lending
after a credit surge in the first half of January weighed on
global investor sentiment this week. Officials have stressed
that they are not calling a halt to lending, but rather trying
to ensure that credit flows are evenly balanced over the course
of the year.

According to a recent Reuters poll of economists, China’s
economy is likely to grow 9.5 percent in 2010, faster than
previously forecast, and the central bank will raise interest
rates twice during the year to keep inflation in check.

Stock Market Basics

(Reporting by Zhou Xin, Langi Chiang and Simon Rabinovitch;
Editing by Toby Chopra)

UPDATE 1-China to keep policy loose despite price pressure