China is likely to adopt tight fiscal policy and loose monetary policy in 2013 as the new government may curtail government-led investments and be more tolerant of slower economic growth, a state researcher wrote in a commentary published in the state-run China Securities Journal Wednesday.
Government-led investments have monopolized bank credit and financing that the private sector needs and those kinds of investments should be contained if China wants to push ahead with reforms and develop new growth engines, Liu Yuhui, director of a financial-research unit at the Chinese Academy of Social Sciences, wrote.
If the new government, which will officially take power next year, adopts a tight fiscal policy, that would indicate it plans to cut spending and limit government-led investments, Mr. Liu said.
The shift in focus would also signal the government may accept slower economic growth, and it is likely to trim next year's gross domestic growth target to 7%, according to the researcher. Beijing this year targets GDP growth of 7.5%.
The new government may maintain a loose monetary policy to reduce the cost of financing for enterprises, which could also help sectors of the economy with high debt to better manage loans and stem systemic risks, Mr. Liu said.
He also predicted that the central bank may also need to lower interest rates to reduce the financial burden for local governments and cut banks' reserve requirement ratios to release more liquidity into the market.
The government is expected to hold an annual central economic work conference next month to set the GDP growth target for next year.
Newspaper website: http://www.cs.com.cn
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(END) Dow Jones Newswires
November 27, 2012 21:51 ET (02:51 GMT)
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