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Chinese leaders promise better macroeconomic control as they struggle to cool inflation

Chinese leaders promise better macroeconomic control as they struggle to cool inflation

Chinese leaders promised Wednesday to improve their macroeconomic controls as Beijing struggles to cool a price surge that has driven inflation to its highest level in 11 years.
A statement issued after a three-day meeting of the Communist Party's Central Committee also promised to improve regulation of investment, consumption and exports. It gave no details of how the measures would be carried out.
Regulators are struggling to prevent the fast-growing economy from overheating and to rein in inflation that rose to 7.1 percent in January, driven by an 18.2 percent jump in food costs. Housing prices also are rising rapidly.
The party will "resolutely implement the central committee's decision to strengthen and improve macroeconomic controls," said the statement, reported by the official Xinhua News Agency.
"In the meantime, we should analyze the changes in development of domestic and international economic situations and scientifically handle the rhythm and magnitude of macroeconomic controls, and endeavor to realize the coordination of the speed and quality and coordination of consumption, investment and exports," it said.
Beijing has raised interest rates repeatedly over the past two years to avert a runaway expansion in an economy that grew by 11.4 percent last year. Growth of at least 9 percent is forecast this year.
Despite two decades of capitalist-style reforms, the communist government lacks many of the financial tools used to regulate growth in other major economies.
It has resorted in recent months to trying to hold down consumer inflation by imposing price controls on food, gasoline, electric power and other consumer basics. But analysts warn that keeping such controls in place will distort the economy, discouraging farmers and others from raising output of food and other scarce goods.
A flood of money pouring into the economy from China's swollen trade surplus also is straining the central bank's ability to restrain pressure for prices to rise. The bank drains billions of dollars a month from the economy through bond sales to reduce the money supply and has piled up more than US$1.5 trillion in reserves.
The government has been trying to encourage Chinese consumers to spend more in hopes of reducing reliance on exports and investment to drive growth.