Recently, Chinese Premier Wen Jiabao said that economic policies may be “fine-tuned” and pledged support for smaller companies that have been hard hit by a credit crunch as monetary policy was tightened to fight rising inflation. The CPI peaked this year at 6.5% y/y during July and fell to 5.5% during October. Wen’s fine-tuning announcement suggests that the balance of risks had shifted from inflation to growth.
 
The central bank may cut reserve requirements for smaller lenders to free …