China Will Adopt `Prudent' Economic Policy, Li Yong Says

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By Nipa Piboontanasawat

Oct. 12 (Bloomberg) -- China will adopt ``prudent'' economic policy to cope with the global slowdown, Vice Finance Minister Li Yong said.

``The institutional constraints and structural imbalances in China's economy, the inflationary pressure and the uncertainty of external shocks by the U.S. financial crisis subject China to immense economic challenges,'' Li said in a statement today in Washington, where he is attending the annual meetings of the International Monetary Fund and World Bank Group. ``To cope with these complexities, China will adopt a prudent economic policy.''

Chinese policy makers have shifted their focus from taming inflation to sustaining economic growth as food prices cool and while weaker exports threaten company profits, jobs and social stability in the world's most populous country.

China ``will enhance the foresight, pertinence and flexibility in its macro economic management,'' Li said. ``It will take measures to maintain stability in the economy and in financial and capital markets so as to achieve sound and rapid economic growth.''

China, the world's fastest-growing major economy, cut interest rates twice this year. It has also lowered the proportion of deposits lenders must set aside as reserves, trimmed the pace of currency gains, raised export rebates, increased banks' loan quotas and reduced stamp duty on stock transactions.

``The dynamics of China's growth has evolved with an improved balance between domestic and external demand and an enhanced ability to resist economic risks,'' Li said. ``Sustained, stable and rapid growth in a country with 1.3 billion people itself represents the biggest contribution to world economic stability and development.''


China's economy grew 10.1 percent in the three months ended June 30 from a year earlier, slowing for a fourth straight quarter as exports cooled. The benchmark CSI 300 Index of shares has fallen 64 percent this year.

``Financial institutions have witnessed an overall improvement in strength and profitability,'' Li said. ``The financial system is both safe and sound.''

In response to the financial turmoil, ``developed countries should adopt responsible macro-economic policies to maintain international macro-stability,'' Li said.

To contact the reporter on this story: Nipa Piboontanasawat in Washington at npiboontanas@bloomberg.net

Last Updated: October 12, 2008 17:23 EDT