China vice premier warns of expansionary monetary policies

November 15, 2010

, BEIJING, Nov 15 – Vice Premier Li Keqiang has warned that loose monetary policies may lead to speculative cash flows and trigger inflation, state media said, in China\’s latest swipe at US economic pump-priming.

"Some major economies, in order to stimulate their own recovery, have adopted continuously expansionary monetary policies that will create enormous liquidity," Li wrote in an article published by the Xinhua news agency late Sunday.

While not mentioning the United States by name, China has led heavy criticism from major world exporting countries of this month\’s decision by the US Federal Reserve to pump 600 billion dollars into the US economy.

Such policies "are likely to spark fluctuations in international financial markets and push up prices of commodities such as energy and resources. The hot money inflow will impact emerging economies as well," said Li, who is widely tipped to succeed Premier Wen Jiabao in 2013.

Critics have also said the US move may make American goods cheaper – posing a threat to the competitiveness of exporting nations – by diluting the value of the dollar.

Li added China faced "new pressures" in stabilising foreign demand for its export goods and maintaining steady economic growth.

He blamed the slow recovery of the world economy and policies by other countries aimed at encouraging their own exports.

At last week\’s Group of 20 summit in Seoul, Chinese President Hu Jintao urged Washington to follow "responsible policies" and maintain a stable dollar, turning the tables after US criticism of Beijing\’s currency and trade policies.

China has long been criticised by its leading trade partners including the United States for keeping its currency artificially low to create an unfair export advantage.

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