China upholds 'prudent' monetary policy

By Kim Young-gyo HONG KONG, Aug. 23 (Yonhap) -- China pledged Tuesday to continue its "prudent" monetary policy, suggesting the world's second-largest economy will continue its tightening measures to curb runaway inflation. The reaffirmation comes amid fresh concerns over a global recession after the first-ever U.S. credit rating downgrade and the persistent debt crisis in Europe gave the global financial markets a beating. "Facing the extremely complicated and uncertain global economic situation, the country's finance sector should strive to better handle the relationship between economic development, economic restructuring and checking inflation, continue to carry out the prudent monetary policy and optimize the credit structure," Vice Premier Wang Qishan said. In late 2010, Beijing started to roll back the expansionary fiscal measures it introduced to counter the financial crisis in 2008 and 2009, as the country faced record-high inflation resulting from excess liquidity and an overheated economy. China is grappling with soaring inflation. China's consumer prices soared to 6.5 percent from a year earlier, up from a 5.5 percent gain in May. The figure was the sharpest gain in 37 months despite the Chinese government's continuous monetary tightening. In a bid to curb inflationary pressure, the central People's Bank of China has raised the benchmark interest rate three times this year while increasing the amount of money banks must keep in reserves six times. Wang, at the same time, urged China's lenders to increase financing for rural development and small businesses in order to ease fundraising difficulties amid the global economic uncertainty and the country's monetary tightening. "Financial institutions should make renewed efforts to meet the reasonable funding demands from small enterprises and the 'three rurals' -- the rural economy, rural community and rural residents," he said. He also urged more efforts to strengthen financial supervision and regulate the financial market to prevent systematic and regional financial risks.