Central bank chief Zhou Xiaochuan issues rising inflation alert

Central bank governor Zhou Xiaochuan yesterday raised an alert about rising inflation and formally declared a shift to a tighter monetary policy this year.

The government may also roll out new measures to control the property market, he told a news conference on the sidelines of the National People's Congress.

Zhou's tough talk confirmed an observation made by many economists that the People's Bank of China has sought to curb credit from expanding too fast.

The remarks contrasted with Zhou's usual approach of treading delicately while speaking to the public on policy directions in order to avoid causing market jitters.

Some analysts said Zhou's comments were aimed at damping inflation expectations and highlighting concern about surging property prices fuelled by accommodative monetary policy in the past several quarters.

Last month, inflation rose unexpectedly to 3.2 per cent.

"Inflation merits high vigilance. We plan to stabilise consumer prices and inflation expectations through monetary policy and other tools," Zhou said, although he added that holiday effects may have distorted the number.

Zhou said the central bank's monetary stance was "relatively neutral" this year and tighter than last year, citing the lower money supply growth target, at about 13 per cent for this year following 13.8 per cent actual growth last year.

In response to a question, Zhou said he did not know whether he would retain his post after reaching the retirement age of 65 this year, although he is heavily tipped to do so. However, he stressed that "whoever runs the central bank, the government will maintain policy continuation and stability, as long as the policies are deemed good".

As for any errors or inaccuracies during his time there, they would be fixed, he said.

Zhou said structural measures that had been rolled out to cool the property market, such as rules on down payments and mortgage rates, would continue.

"The magnitude of some steps may also be strengthened."

The capital market has been sensitive to any speculation over property measures after the State Council urged authorities to curb speculative activity in the market.

As of last month, the national average home price hit a record high of 6,637 yuan (HK$8,284) per square metre, an increase of 21 per cent year on year, according to data from the National Bureau of Statistics.

In Shenzhen, the municipal government denied media reports that the city was poised to cap the growth of new housing prices at "zero", after reports sent shares of mainland developers diving yesterday.

Additional reporting by Sandy Li in Hong Kong