China central bank head says challenges sure to show up

Beijing: China must prepare for challenges that will doubtless be thrown up by the global financial crisis, though the economy is generally in good shape, the country's central bank governor Zhou Xiaochuan said on Sunday.

Reporting to the Standing Committee of the National People's Congress, or parliament, on China's prospects in the face of the worst financial crisis in 80 years, Zhou struck a balance between confidence and caution.

"We must not underestimate the impact on our economy," he said on state television.

"The economy's basic momentum has not changed. But in order to confront the many destabilising and uncertain factors that exist, it is necessary to strengthen our awareness of the dangers, proactively cope with the challenges, and do a solid job of preparing to face potential difficulties."

The country's financial institutions had emerged stronger from the financial crisis and there was still ample cash available, boding well for the stability of the financial system even in the face of external risks, he said, according to a transcript of his remarks published by the China News Service.

The People's Bank of China (PBOC) would step up communication with other key central banks and improve its own supervision and management over speculative capital flows to ensure that no potentially damaging outflows would occur, he said.

In addition to increasing export tax rebates for many products and making it easier for people to get mortgages, the government has announced that it will spend two trillion yuan (Dh1.07 trillion) on expanding its railways.

Zhou added the central bank would keep a close eye on consumer prices, even though inflation has eased in the past several months, slowing to 4.6 per cent in September from a peak of 8.7 per cent in February.