September 25, 2011 8:21 AM EDT
China's economic outlook is positive, but it must keep battling inflation and be ready to counteract any external shocks, the country's top central banker said on Saturday.
People's Bank of China Governor Zhou Xiaochuan said China should prevent rapid growth from overheating what many viewed as the world's leading economic engine, and called on Europe to aggressively deal with the region's worsening debt crisis.
It would be unrealistic for anyone to hope China could dramatically accelerate its growth rate, and such a rate would not be sustainable, Zhou said at a press conference during this week's meetings of the International Monetary Fund and the World Bank.
"The reasonable expectation probably should be somewhere around 8 percent or 10 percent," he said.
China's economy grew at an annual rate of 9.5 percent in the second quarter, the slowest pace since the third quarter of 2009, but still faster than economists had expected.
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Asked how he viewed the European debt crisis, Zhou said "We have to see if the euro zone countries can implement the decisions taken on July 21" before China can decide its response.
Euro zone leaders agreed on July 21 to allow the European Financial Stability Facility (EFSF), a bailout fund, to buy bonds of distressed governments and give precautionary credit to governments before they are cut off from markets.
China also needed to stay flexible in its economic policies -- a signal that it could consider new stimulus measures, but Zhou stressed that battling inflation remains his top concern.
"There is no very quick, immediate way to bring down inflation. It takes time," he said, adding that economic uncertainty outside of China could also affects domestic inflation.
Earlier on Saturday, Zhou said in remarks to the IMF's steering committee that the central bank will reduce inflation in the short term without major disruptions to the economy, while facilitating growth over the medium and long term.
At this week's meetings of Group of 20 major economies and the IMF, officials have called for China to boost domestic consumption to help maintain global growth amid turmoil in Europe and weakness in the United States.
Zhou said on Thursday that the major emerging markets should find ways to boost internal demand.
With $3.2 trillion in reserves, Beijing has ample firepower should it choose to spend more, but it would have to be careful to avoid side effects such as more inflation and overinvestment in some projects.
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