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Central bank to seek policy balance
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The People's Bank of China (PBOC), the central bank, said on Friday that it would seek a balance between fighting inflation and boosting economic growth in the rest of the year to ensure a steady and fast economic development.

PBOC expected the country's economic growth to remain steady and fast in the second half despite challenges from home and abroad, boosted by increasing domestic demands, industrial structure upgrading and fast industrialization and urbanization, it said in the monetary policy implementation report for the second quarter.

The central bank said it would make small changes to its monetary policies at a proper time in the second half, responding to the domestic challenges and uncertainties in the global economy.

The government had focused on using tightening policies to fight inflation and to prevent the economy from overheating. But economists were calling for minor changes to the macro-economic policy to avert the risk of sharp economic slowdown.

The country's consumer price index (CPI), a main gauge of inflation, eased to 6.3 percent in July from 7.1 percent in June, 7.7 percent in May and a peak of 8.7 percent in February.

According to the PBOC report, the central bank would encourage financial institutions to increase credit supply to key industries and weak links, especially to small enterprises, post-quake reconstructions and those concerning agriculture, farmers and rural areas.

The report also urged tightened supervision on the foreign exchange flows to prevent the risk of large amount of outflows.

The State Administration of Foreign Exchange (SAFE) created a new system last month that enabled real-time monitoring of the foreign exchange flows. The system is mainly an Internet-based data exchange mechanism among SAFE, banks, enterprises and accounting firms.

The system should be well managed, the PBOC said. On Thursday, the central bank announced that it would establish a department to deal with foreign exchange issues.

(Xinhua News Agency August 15, 2008)

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