China plans to shift to a “tight” monetary policy in 2008, signaling the government may raise interest rates further and allow quicker currency appreciation as the economy heads for its fastest expansion in 12 years.
The central bank changed its stance from the “moderate tightening” bias of recent months and “prudent” policy of the preceding decade, in a statement released today at the end of a three-day meeting of China’s top leaders and financial officials.
The change underscores the government’s failure to cool the world’s fastest-growing major economy after five interest rate increases this year. China’s economy grew 11.5 percent in the third quarter, inflation is running at a decade high and the benchmark stock index has more than doubled in 2007, as an export boom pumps cash into the financial system. [Full Text]