China to Control Inflation, Support Growth, Bank Official Says

By Judy Chen and Lee Spears

Sept. 20 (Bloomberg) -- China will strike a balance between controlling inflation and supporting economic growth, central bank Deputy Governor Su Ning said.

``We should continue to be alert to inflation,'' Su said at a financial conference in Shanghai today. ``We are confident about maintaining the stability of the financial market.''

China cut borrowing costs for the first time in six years on Sept. 15 as an export slowdown and a global credit crisis threatened to undermine growth in the world's fourth-biggest economy. The central bank remains concerned that inflation will rebound after easing to a 14-month low in August.

``China will be highly alert of the negative effects of unstable global financial markets and decreasing overseas demand'' for Chinese goods, Su said. ``Even though the direct impact of the subprime crisis is limited, uncertainty about China's economic growth has increased.''

The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent. It also lowered the proportion of deposits that the nation's smaller banks are required to set aside as reserves.

Consumer prices rose 4.9 percent in August, down from a 12- year high of 8.7 percent in February. Central bank Governor Zhou Xiaochuan said Sept. 8 that ``we can't relax'' as inflation may still accelerate.

While China's growth is the fastest of the world's 20 biggest economies, policy makers are concerned that weakening global growth has increased the risk of a slump. The nation's economy expanded 10.1 percent in the second quarter, the least in more than two years.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Lee Spears in Beijing at lspears2@bloomberg.net.