China’s central bank prepares for the worst

The People’s Bank of China hopes to avert mounting economic unrest with a series of measures that include more support for struggling entrepreneurs and relaxing curbs on investment and lending.

The central bank is promising pro-growth conditions in 2012 but says it will stay prudent amid complex global conditions and inflation pressures. It also has to contend with weak global demand, rising consumer prices and surging housing costs.

The central bank has pledged “. . . to optimize the credit structure to support the real economy,” and especially “. . . small and micro enterprises.”

By “real economy,” the central bank meant productive businesses and not stock and real estate speculators.

Central bank Gov. Zhou Xiaochuan said policymakers face conflicting forces such as decelerating export growth, Europe's debt crisis and pressure for Chinese prices to increase.

"Overall, in 2012 the world economy has relatively more difficulties and uncertainties," Zhou said.

The central bank promised to improve operations and risk management in China's banking industry. But it made no mention of reforms that economists say are needed, such as allowing market forces to play a bigger role in bank decisions about who can borrow and at what interest rate.

At a recent weekend conference, however, no major reform initiatives were announced by Communist leaders who met to make plans for financial industries for the next five years.

Analysts say China's state-owned banking industry, which lends mostly to government companies, has to be made more market-oriented to support entrepreneurs who create most of the country's new jobs and wealth.

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