国际英语新闻:Inflation control target, how far to go?

China should still stick to a prudent monetary policy, the China Securities Journal quoted central bank advisor Xia Bin as saying last Wednesday.

Xia said the moderate rise in the yuan's value can help control imported inflation, but relying solely on the yuan's appreciation to contain inflation is unrealistic.

Under the current economic situation, the government should also continue to accelerate diversifying the allocation of its foreign reserves and the yuan's "go-global" drive, Xia suggested.

China's Ministry of Commerce stated last Wednesday that it will try to formally green light foreign direct investment (FDI) in the Chinese currency renminbi (RMB), or the yuan, in September.

"The ministry has released a draft regulation on cross-border direct investment in RMB and we'll try to put it into effect in September," ministry spokesman Shen Danyang told a press conference.

The ministry posted the draft on its website last Monday night to solicit public feedback until Aug. 31.

If implemented, the rules will expand channels for overseas-acquired RMB funds to flow back into the country.

The move is expected to give a push to the RMB's internationalization drive.

In addition to monetary policy, interest rates adjustment has drawn intense attention as well.

The central bank has raised interest rates three times and increased its reserve requirement ratio for banks six times so far this year, in a bid to tighten monetary supply and cool inflation.

The reserve requirement ratio is already at a record high of 21.5 percent and has limited room for further rises, chief economist Li Xunlei of Guotai Junan Securities said, according to Xinhuanet reports on Aug. 7.

Industrial Bank's chief economist Lu Zhengwei said there is big chance that another interest rate hike will occur in August, according to the Securities Daily.

Xu Xiaonian, a professor at China Europe International Business School, said he expected more interest rate hikes in order to solve lingering inflation.

"China still faces tough inflation in the second half of this year, due to the excessive money supply in the past two years, which is still expanding at a rapid growth," said Xu while attending the fifth annual China Bankers Forum.

Only by putting an end to the current actual negative interest rate can inflation be solved, Xu said.

But Fan Gang, a former senior advisor to the People's Bank of China, or the central bank, expressed his concern that higher interest rates could attract more hot money inflow, which could threaten the development of emerging economies.

Fan said China should make full use of the central bank bill, which is more flexible for commercial banks as a way to regulate market liquidity.

According to Fan, with excessive money supply and continuing hot-money inflow that pushes up China's foreign exchange reserves, this is the only way to bring market liquidity under control.