INFLATION remained the primary risk to China’s economy, and the government would stick to a tight monetary policy, domestic media reported yesterday, quoting a central bank vice governor.

However, the tightening measures would be “proper” and “moderate” to avoid hurling the world’s fourth-largest economy into recession, Yi Gang told a seminar in Beijing on Sunday, according to the Xinhua news agency.

Yi’s remarks suggested no major rethink of the tight monetary policy which the central bank announced in December to supersede the “prudent” monetary stance that had set the tone of policy-making for a decade.

China’s inflation rate hit 7.1 percent in January, the highest level in more than 11 years.

Although the impact of the U.S. subprime crisis was spilling over and China was suffering from the worst winter weather in 50 years, the government would not change its tight monetary policy, Yi said.

The People’s Bank of China had evaluated the influences of the two factors on investment, consumption and trade and would keep the policy unchanged, he said.

The central bank indicated in its latest quarterly report Friday that it was prepared to hike interest rates again to tame inflation.

“(We will) use the interest rate leverage rationally and steadily push forward the market reform of interest rates,” the bank said in the report.

“Based on changes in the domestic and international macroeconomic and financial situation, we will bring the interest tool into play in a proper fashion to curb demand inflation and stabilize inflationary expectations.”

China hiked interest rates six times last year in an effort to tame inflation and cool the economy, which nevertheless grew at 11.4 percent in 2007.

(SD-Agencies)