China’s PMI and monetary policy

The latest news from XINHUA shows that China’s Purchasing Managers Index (PMI),is rising for the fourth consecutive month to the highest level since October last year. Such PMI reading shows that the Chinese economy, despite talks of a Chinese economical collapse, is growing steadily.

The PMI is a preliminary readout of the country’s manufacturing activity. PMI climbed to 53.1 percent in March 2012 which is 2.1 percent higher than February.

Furthermore, China’s central bank said that it will continue to ensure that the monetary policy is reasonable. In order to ensure stable and relatively fast economic growth where the overall price is stable and any financial risks are minimized, a ‘prudent’ monetary policy will be the focus for now.

According to a statement in the first-quarter monetary policy report, flexibility and pertinence in China’s monetary policy is needed.

The central bank said it will gradually promote the liberalization reform of interest rates which will improve the formation mechanism of the yuan’s exchange rate. This will then ensure greater flexibility and stability.

Information provided from CHINADAILY and Xinhua.



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