Bank regulator plays down inflation risks

Beijing: China is very unlikely to experience serious inflation this year, according to China's top banking regulator.

Beijing has enough "ideas and tool kits" to manage inflationary expectations, Liu Mingkang, chairman of the China Banking Regulatory Commission, told the official Xinhua news agency.

"Don't get into too much of a panic or be afraid about inflation," Liu said. "China's CPI [consumer price index] and PPI [producer price index] may rise slightly, but there's only a small chance that inflation will be more than moderate."

China has targeted a 3 per cent rise in consumer inflation for 2010. The CPI and PPI for February are due to be released today.

Beijing is also aiming for net new lending this year of 7.5 trillion yuan (Dh4.03 trillion), and Liu said his agency would ensure that "every penny flows into the real economy".

Critics contend that a chunk of last year's record 9.6 trillion yuan in lending was illicitly funnelled into property and shares.

Scorecard

Meanwhile, Chinese exports and imports grew faster than expected in February, underlining the momentum behind the world's third-largest economy and reinforcing the case for a rise in the yuan. Economists cautioned against over-interpreting the figures, skewed because of the timing of the long Lunar New Year holiday, but said the basic message was one of gathering strength that would justify a firmer exchange rate to nip inflation in the bud. Exports jumped 45.7 per cent in February from a year earlier, following a 21.0 per cent rise in January, while imports surged 44.7 per cent after record growth of 85.5 per cent in January, the General Administration of Customs said on Wednesday. Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said the data cemented his view that exports in 2010 could surge 30 per cent, dwarfing Beijing's forecast of an 8 per cent rise.

"Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening," Ma said. China reported a trade surplus for February of $7.6 billion, compared with $14.2 billion in January.

Economists had expected an $8.0 billion surplus based on a 38.7 per cent rise in exports and a 39.7 per cent rise in imports from year-earlier levels.

• 9.6tr China's lending lastyear (in yuan)
• 45.7% surge in Chineseexports in February
• 44.7% rise in China's imports last month