BEIJING (Reuters) - China could tighten monetary policy next year to temper risks to the economy, including from exchange rate volatility, rising inflation and the property market, an adviser to the nation’s central bank was quoted as saying in state-owned newspaper China Business News. Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, in this March 30, 2016 file picture. REUTERS/Kim Kyung-Hoon/Files Sheng Songcheng, an adviser at People’s Bank of China (PBOC), said comments on Friday by China’s top leaders to keep monetary conditions “prudent and neutral” in 2017 suggested policy is currently too loose. “My personal impression is the current monetary policy may have been a bit too loose,” Shen said, according to Monday’s edition of the China Business News, a financial newspaper. His remarks were made on Sunday during an economic forum in Shanghai. Sheng said there would be no grounds for easing next year especially given exchange rate volatility and rising inflation. He also cited the stock and property markets as risks but didn’t elaborate. Sheng emphasised that monetary policy wouldn’t be “too tight” either as that would lead to market turmoil. On Friday, a much-anticipated annual economic work conference mapped out economic priorities for 2017. It said China would maintain a prudent and neutral monetary policy, and a proactive fiscal policy while fighting off financial risks and asset bubbles. [nL4N1EB3GC] Data over the past two months has shown the world’s second-biggest economy is stabilising, but pockets of weakness remain, especially in the manufacturing sector where state-owned enterprises remain in low-gear due to overcapacity and a dangerous build-up of debt. Speculators have also been behind a boon in the property market, and though the sector has begun to cool in recent months, there are worries that a sharp downturn could hit the economy hard. Sheng estimated that M2 money supply would grow by less than 12 percent in 2017, compared to 13 percent growth target for 2016. He said the fiscal deficit would “definitely” exceed 3 percent of gross domestic product (GDP) in 2017 and might even reach 5 percent “if necessary”, based on calculations on China’s debt burden. In 2016, the fiscal deficit was budgeted at 3 percent. Commenting on the property market, Sheng said the talk of quickly establishing a long-term stabilising mechanism by the work conference was a signal that China would be more focused on supply-side measures instead of short term demand-side curbs. However, a property tax would take many years to be introduced due to its complexity, he said. Reporting by Yawen Chen and Nicholas Heath; Editing by Shri Navaratnam
Risks to the Chinese economy, such as exchange-rate volatility, accelerating inflation and an over-heating property market could lead China to tighten monetary policy next year, according to Sheng Songcheng, an adviser at China Business News. "The current monetary policy may have been a bit too loose", but tightening monetary policy too much would lead to market turmoil, Sheng said. However, an economic work conference said China would maintain a prudent and neutral monetary policy and proactive fiscal policy to limit financial risks and asset bubbles.