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Monetary Policy of China in 2013

By Kim Young-gyo

China will implement a cautious monetary policy next year, as the country seeks to rebalance its economic structure, a Beijing scholar said Monday.

Hu Xingdou, a political economist at the Beijing Institute of Technology, predicted China's newly installed leadership will seek to establish a monetary policy in that way, saying more measures to boost the country's consumption will be introduced as well.

A new crop of Chinese leaders for the next decade was appointed last month, with the members of the Chinese Communist Party's Standing Committee, the most powerful decision-making organ within the only de facto political party in the country, selected. The committee is led by Xi Jinping, who will be officially named the country's president next March.

China was expected to adjust the components of the economic growth largely driven by exports and investment in a bid to sustain rapid and stable growth for the rest of the coming decade.

"Stabilizing growth and securing people's livelihoods will be the major issues to be dealt with by the new leadership," Hu said.

"The leaders should put priority on adjusting the economic structure, but at the same time, they should still manage to maintain growth."

Hu expected that the country's economic recovery will accelerate if the authorities speed up efforts to boost the rural population's purchasing power through reforming the residency registration system and increasing land compensation for farmers.

Despite witnessing rapid economic growth during the past decade, China is widely seen to have distorted its economic structure through growth-focused policies.

The country is currently seeing the state-owned firms' dominance over private enterprises, lower domestic spending compared to higher external demand, and widening income gaps between the rich and the poor as well as between the urban areas and the rural areas.

In the national congress of its ruling communist party held last month, Beijing stressed that the world's No. 2 economy should attain the goal of building a "moderately prosperous society" in all respects by 2020.

It set a new target for economic growth, saying that China should double its 2010 gross domestic product (GDP) and per capita income for both urban and rural residents by 2020.

China's economic growth decelerated throughout this year due to the eurozone debt crisis and other global uncertainties.

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