China's central bank to continue easy monetary policy in 2010

Rather than unwinding its stimulus measure adopted at the height of the global economic crisis, China, which has maintained a moderately easy monetary policy so far, will continue doing so in 2010, says the People's Bank of China.

The Chinese central bank feels this would facilitate the ongoing development transformation and also reinforce the country's sound and relatively fast economic growth.

The Chinese economy is expected to remain stable while seeing a relatively quick expansion this year, the bank said, in a report on China's regional financial operations.

However, the bank noted that the foundation of the recovery is not solid, the People's Bank of China said. Therefore the country needed to follow a policy required "to achieve price stability and thereby contribute to the recovery."

China still needed to improve its ability to be innovative while also continuing to stimulate consumer spending as well as optimising the country's economic structure amid tough emission cutting targets, said the report.

The report observed that the potential fiscal risk should not be overlooked. Many uncertainties, including the expanding European sovereign debt crisis, trade frictions, and the stimulus exit, would have a significant impact on China's economy.

The central bank has also encouraged financial institutions to lend to companies mainly in the new energy sector, small enterprises and job-promotion businesses, at the same time to avoid industries with high energy consumption and emissions as well as those with overcapacity.

China has maintained that its monetary policy is driven more by domestic factors than by external ones, although the economy is export-oriented. Moreover, China has continued to maintain a loose monetary policy as a measure to give impetus to the country's economic growth.