Beijing will use a combination of monetary tools to tackle inflation and steer the mainland towards a soft landing, People's Bank of China governor Zhou Xiaochuan says.
Zhou's comment came as business activities in the non-manufacturing sector rebounded in March on rising market demand, strengthening the case for the world's second-largest economy escaping a bruising slowdown.
The non-manufacturing Purchasing Managers' Index (PMI) rose to a revised 58 last month, from February's 57.3 and January's 55.7, the China Federation of Logistics and Purchasing (CFLP) said yesterday. A PMI reading above 50 indicates expansion from the previous month; one below 50 indicates contraction. Two days ago the federation reported the manufacturing PMI was 53.1 in March, the fourth straight month it has risen and its highest level since March last year.
All major sub-indices under the non-manufacturing PMI rose in March, the federation said.
'I think that for China and other economies, the policy goal is gradually to bring inflation down so it's a soft landing,' Zhou told a panel session at the Boao Forum for Asia in the island province of Hainan.
Zhou said the US Federal Reserve should consider other countries' interests when setting policies that create liquidity risks for emerging economies. 'We understand that quantitative easing is one possible choice. But it is very difficult to control the flow of liquidity,' he said. 'While it is hoped that money injected into the US economy will stay there, inevitably some emerging economies will suffer too much capital inflow.'
Zhou said a plan by the BRICS group of emerging economies to establish a joint development bank was feasible, despite suggestions it would act as an alternative to the World Bank. The BRICS are Brazil, Russia, India, China and South Africa.
'There is room for such a bank because the performance of existing regional development lenders in helping emerging economies to cope with the global financial crisis has not met expectations,' Zhou said. Last week, World Bank president Robert Zoellick said the new lender would struggle to match the expertise of the World Bank, which is traditionally led by the United States.
Zhou and other Chinese ministers attending the forum have also warned that the global economy could slip back into recession. 'We are still in the global financial crisis period and there are new elements that may bring the global economy back to recession,' Zhou said.
Zeng Peiyan, former vice-premier and chief planner, also warned of uncertainties ahead. 'There are various kinds of uncertainties facing the global economy and they constitute tough challenges for emerging economies, despite some signs of gradual recovery,' Zeng, also vice-chairman of the Boao Forum, told a lunch session.
Also at the lunch, Zhang Xiaoqiang, vice-chairman of the National Development and Reform Commission, said: 'It will take great effort to achieve the annual target for economic growth by adopting a prudent monetary policy and proactive fiscal policy this year.'
Zhang said Beijing would work to boost domestic, and particularly consumer, demand and the development of the country's vast rural areas.