China sets prudent, pro-active policies for 2012

China will maintain "prudent" monetary and "proactive" fiscal policies in 2012, the official Xinhua news agency said as the country's top economic policy-setting conference closed its annual meeting on Wednesday.

The decision effectively endorses one made by the top Chinese leadership last week, which suggested Beijing is not ready to explicitly shift to a pro-growth policy stance despite a cooling global economy.

"The country will ensure that macro-economic regulation policies and overall consumer prices remain 'basically stable', and will guarantee the steady growth of the economy and maintain social stability," one of a series of statements issued at the end of the conference said.

At the same time, China will keep the yuan's value "basically stable" whilst deepening interest rates and exchange rate reforms, a statement said.

Measures aimed at calming the property market will be maintained to ensure prices "return to a reasonable level," more homes will be built to boost housing supply, a statement said.

Economists said the official rhetoric suggested Beijing is only ready to fine-tune economic policies, rather than swing into an outright monetary easing mode to aid economic growth.

"There is no sharp reversal of (monetary policy) and there is no across-the-board easing," said Wang Jun, an economist at CCIEE, a top government think-tank in Beijing.

"People may feel a bit disappointed. There is limited room for big policy adjustments as inflation has just slowed while economic growth is not that pessimistic."

Indeed, one of the statements said Beijing aims to make policies more targeted and flexible to keep pace with changes in the world economy, whose 2012 outlook was described as being "extremely grim."
To that end, China also faces pressures from both slowing economic growth and inflation, a statement said.

The Central Economic Work conference is the biggest annual set-piece meeting in China's economic calendar, bringing together China's top leadership, provincial government leaders, ministers, the heads of the biggest state companies as well as the generals from the People's Liberation Army.

Private-sector economists believe China has tacitly shifted to a pro-growth policy stance, despite official language remaining broadly in line with previous commitments.

A Reuters poll last week had a consensus view that China was primed to roll back much of the monetary tightening it had used to tame inflation over the last year and cut the ratio of deposits that banks are required to keep as reserves (RRR).

No aggressive policies were forecast to be used to stimulate the economy unless there was a sharp slowdown in GDP growth below 8 percent.