People walk past the headquarters of the central bank of the People’s Republic of China in Beijing February 16, 2009. REUTERS
BEIJING, March 31 (Reuters) – Imported inflation stemming from the Middle East conflict will put pressure on China’s economy, requiring policymakers to juggle rising inflation alongside slowing growth, a Chinese central bank adviser said on Tuesday.
While consumer inflation remains subdued and provides some buffer, the extent of the impact will hinge on how long and how severely the conflict drags on, Huang Yiping, a member of the monetary policy committee at the People’s Bank of China (PBOC), said at a media briefing in Beijing.
China’s year-on-year consumer inflation accelerated to the highest in more than three years in February to 1.3%, but remained below the government’s around 2% target for the full year.
“What I am worried about the most is the shock to companies’ profitability from rising oil prices, as the squeeze would be very adverse for the real economy,” Huang said.
Monetary policy has limited scope to offset imported inflation, but a policy response is certain if price increases become widespread, he added.
“We will have to balance between the rising inflation and the downward pressures on economic growth.”
PBOC Governor Pan Gongsheng has said the central bank will maintain an “appropriately loose” monetary stance, deploying tools including reserve requirement cuts and interest rates to keep liquidity ample.
Reporting by Ellen Zhang and Kevin Yao; Editing by Jamie Freed and Shri Navaratnam