According to an article in British “Financial Times” website, Beijing has given a lesson to the central banks of all countries
There has ever been a widespread concern that the Chinese economic might get a hard landing, but on the contrary, China has made those countries who do not see its bright future disappointed. Although Premier Wen Jiabao has just warned that economic growth would moderately slow down, in economic management, China’s performance was far better than what most people had ever expected. In fact, China’s success in terms of macroeconomic strategy has taught the pther countries in the world a valuable lesson.
The most obvious example is in the control of inflation. During the Combat long-term against inflation which has posted the greatest threat to Chinese economic stability, the Chinese government has played a very successful campaign. The consumer price index had ever achieved the peak of 6.5% in July 2011, but in early 2012 it had decreased to 4.5% and it may continue to decline in coming months. To this end, Beijing has taken three very deliberate policy actions. First, it has taken the administrative measures on weak links such as pork, edible oil, fresh vegetables and fertilizers and other agricultural products. Accounting for about one-third of the China’s consumer price index, the food inflation rate had ever reached the peak of 15% in 2011, but now it has now dropped to 10%. Second, in order to slow credit growth, in 2011 the bank deposit reserve ratio has been increased for 12 times. The results are rather encouraging. the growth rate of the yuan of bank loans decreased from 19.9% in 2010 to 15.8 % in 2011. Third, the People’s Bank of China has increased the policy interest rates five times in 2011. Taking into account the non-food inflation rate last summer, that is the core inflation rate has reached 3% which has been the fastest growth rate for the past ten years, this measure is particularly important.