China will tighten monetary policy significantly next year, confirming speculation about the outcome of yesterday's top-level meeting. The central bank and the National Development and Reform Commission will review its 2008 monetary policy to "tight," a tougher stance than the previous "stable-to-tight" policy from earlier this year.
New restrictions on bank loans will follow. The process of slowing down new loan growth began in October when banks were told to keep net new loans stable at mid-October level until December 31st. New restrictions will cause bank loan growth to drop to 13% in 2008, a net 2% decrease from recent years.
This announcement came at the end of the annual Central Economic Work Conference, chaired by President Hu, whose immediate agenda was greatly focused on cooling China's overheated economy and curbing inflation. Other issues on the agenda included addressing China's vast trade surplus and improving social conditions. Broad economic initiatives were concluded from the meeting rather than specific legislation, as the policymakers did not give details on how the new changes would be implemented.
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