Wu Xiaoling, Deputy Governor of People's Bank of China, said at an annual conference on the analysis, forecast and prospect of domestic financial situation in 2006 that there will be three challenges ahead of China's economic development.

Investment rebound is still likely. It is said that a group of major infrastructure construction projects will be launched in the year of 2006, the first year of the "Eleventh Five-Year" plan. Consequently, the pressure from investment rebound will still remain high in light of the over-heated enthusiasm for investment.

The coexistence of pressure from adjustment of resources price and capacity surplus will put both upward and downward pressures on price level. Especially, the trend of price hike that results from the restriction of energy and resources should be given earlier attention.

To ease the contradiction between balance of international payment and strategies dealing with capacity surplus, China must step up effort in structural adjustment. Meanwhile, the employment problem and risks from banking asset quality during the process demand much attention.

Wu also noted that the flexible control of market liquidity is one of the major macro-control measures central bank is about to take this year. While maintaining the stability and neutrality of monetary policy, central bank will adopt comprehensively various monetary tools and set the cash level appropriate for commercial banks.

By People's Daily Online