China Pledges to shift Growth Model in 2011

China’s leaders pledged to accelerate a shift in the nation’s growth model in 2011 and also focus on stabilising prices after an annual meeting in Beijing to set economic policy guidelines.

The state-run Xinhua News Agency reported on the outcome of the so-called Central Economic Work Conference, attended by President Hu Jintao and Premier Wen Jiabao. Its initial accounts didn’t give any specific targets for growth, inflation or lending. The government reiterated its intention to keep the currency stable.

China is seeking to shift from dependence on investment in industry and exports to bolstering private consumption and service industries, a move that could also aid the world economy. The nation is tightening monetary policy to cool inflation that accelerated to 5.1 per cent in November, the fastest pace in 28 months.

“The top concern for the government next year will be to contain inflation, stabilise growth and spur consumption,” Lu Zhengwei, a Shanghai-based economist with Industrial Bank Co, said before today’s announcement.

US lawmakers and officials say a stronger Chinese currency would help to reduce global trade imbalances, boost private consumption and contain inflation.

The government aims to improve the renminbi’s exchange- rate mechanism and ensure “basic stability” at a reasonable and balanced level, Xinhua said. The report didn’t comment on the pace of currency appreciation. The nation will focus on encouraging imports as well as exports, it added.

Today’s comments alluded to the risks from the record lending that jump-started the Chinese economy during the financial crisis, including concern that banks will be saddled with bad loans to local-government financing vehicles.

China will step up management of local-government debt and prevent officials “blindly” starting new projects as a the next national five-year plan begins, Xinhua reported. Officials will also seek to better manage liquidity, the news agency said.

The meeting affirmed the “prudent” monetary policy and “proactive” fiscal stance for next year that the Politburo described on December 3.