UPDATE 3-China’s Wen: confident on inflation after rate rise

* Premier reiterates China able to keep prices “reasonable”

* Comments come a day after Christmas Day rate rise

* Wen vows to reinforce property tightening measures

(Adds comment)

By Langi Chiang and Chen Aizhu

BEIJING, Dec 26 (BestGrowthStock) – China’s government will be
able to keep inflation in check, Premier Wen Jiabao said on
Sunday, a day after the central bank raised interest rates,
and he pledged to speed up efforts to rein in house price
surges.

Steps taken in the past month, including administrative
controls to curb speculation and monetary tightening, had
started to produce results, Wen said.

The People’s Bank of China raised interest rates on
Christmas Day for a second time in just over two months as
Beijing strengthened its battle against stubbornly high
inflation. [ID:nTOE6BO010]

Analysts said the latest rise showed that measures such as
increasing banks’ required reserve requirements to rein in
liquidity were not enough on their own, and that the Chinese
authorities were determined to keep inflation under control.

“We have raised reserve requirement ratio for six
consecutive times and increased interest rates twice to absorb
excess liquidity in the market to keep it at a reasonable
level to support economic development,” Wen said in a state
radio broadcast a day after the rate rise.

“I believe we can keep prices at a reasonable level
through our efforts. As a major leader of the government, I
have the responsibility and I have the confidence, too,” he
said in remarks published on www.cnr.cn.

The rate rise came after Beijing said earlier in December
it was switching to a “prudent” monetary policy, from its
earlier “moderately loose” stance.

“The rate rise shows China is quickening its pace to
normalise monetary policies,” said Ba Shusong, a senior
economist with the Development Research Center, under the
State Council, the country’s cabinet.

“The front-loaded tightening, before the peak of consumer
inflation in the first half of 2011, is helpful to curb
inflationary expectations,” Ba was quoted as saying on the
financial website www.caing.com.

AHEAD OF THE CURVE

Chinese authorities have repeatedly stressed the
importance of staying ahead of the curve in the battle against
inflation.

“Inflationary expectation is worse than inflation itself,”
Wen said in the radio broadcast.

“When there is inflation, we must establish confidence,
know our vantage points and take forceful and decisive
measures in a timely manner to curb price rises.”

The central bank said on Friday it would deploy a range of
measures to head off inflationary pressures and asset bubbles.
[ID:nTOE6BO010]

China also intensified its property tightening measures in
April and September in an attempt to brake soaring property
prices.

“Until now, the measures are not implemented well enough,
and we will reinforce our efforts in two ways,” Wen said.

The government plans to build 10 million units of
affordable housing in 2011, up from this year’s target of 5.8
million.

China will also increase efforts to curb speculation in
the real estate market, mainly through monetary policies and
stricter use of land, Wen said, without giving details.

Property transactions as well as land costs, a major
contributor to high housing prices, have shown signs of a
rebound in recent weeks, triggering concerns of more tightening.

Despite all the challenges, Wen said: “I believe property
prices will return to reasonable levels through our efforts. I
have the confidence.”

Chinese stock markets have shed nearly 10 percent since
mid-November on concerns the government would ratchet up its
monetary policy tightening in the face of rising inflation.

However, analysts sugggested China’s share market could
push higher on Monday on optimism about the overall outlook
for shares in 2011.
(Editing by Robert Birsel)

UPDATE 3-China’s Wen: confident on inflation after rate rise