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C. bank advisor:China Must strengthen its monetary policy

monitory policy chinaBEIJING:An advisory to the central bank said in remarks published late on Saturday. China should tighten monetary policy to staunch liquidity, and more measures should follow next year.

“We need to find ways to drain excessive liquidity, and adopt a suitably tightened and prudent monetary policy,” Xia Bin, an academic advisor on China’s central bank’s monetary policy committee said in an interview with a popular financial news website (www.hexun.com).

The fact that the economy was flush with money was the fundamental reason for the recent spike in inflation.  China’s consumer inflation climbed to a 25-month high of 4.4 per cent in October,Xia said.

Xia does not have decision-making power as an advisor to the central bank, but does provide input to the policy-making process.

On Friday, the People’s Bank of China announced that it would increase required reserves by 50 basis points, its fifth such announcement this year, to remove excess cash from the economy.

Xia, a former vice governor of the central bank, also said that the country could afford to further raise required reserves.

That China, in the face of the United States’ “irresponsible printing of dollars”, needed to strengthen its supervision of capital inflows and foreign investment in China,He said.

China’s foreign exchange regulator said on Monday that foreigners would only be able to buy one home in China to curb speculation.

Xia added,“I personally think that limits on foreign investment speculation on commercial buildings should also be strengthened,” .

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