ADB chief:China's latest move to rein in liquidity appropriate
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Asian Development Bank (ADB) President Haruhiko Kuroda said Thursday that China's move to raise the bank reserve requirement this week will help cool down the overheating real estate sector but will not undermine the country' s strong recovery.
The central bank of China announced late Tuesday that it is going to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year, the first increase since June 2008, reflecting Beijing's concerns over the excessive liquidity brought by the government's implementation of extraordinary stimulus last year to combat recession.
Kuroda said the central bank's latest move is not so much of tightening but a fine-tuning of the extremely expansionary monetary policies towards more neutral and less expansionary ones.
"It appears quite appropriate," Kuroda said, adding that the inflationary pressure at present is not so prominent but in some cities real estate prices have risen very sharply.
Speaking at an economic forum held in the ADB headquarters here, Kuroda said while developing Asia is leading the global recovery, policy makers should carefully time the exit strategies for fiscal stimulus.
"The recovery could falter if policy makers tighten too early. But tightening too late may lead to higher inflation and unsustainable fiscal deficits and large debts," he said.
But Kuroda said he does not think that the move would affect China's rapid rebound. He said China's economic growth is set to reach the government's target of 8 percent in 2009 and is forecast to reach 9 percent this year.
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