China needs to cut its high savings rate to boost consumption and reduce the trade surplus, People's Bank of China Governor Zhou Xiaochuan said Saturday.

    "The government has pledged to boost consumption and cut the surpluses in trade and capital accounts," Zhou said at the Lujiazui Forum 2008 in Shanghai. That "requires that we reduce the current high savings ratio," he said.

    China's trade surplus is pumping cash into the world's fastest-growing major economy, threatening to stoke inflation that jumped to an 11-year high of 8 percent in the first quarter. April's trade gap was about 16.8 billion U.S. dollars, according to figures derived from Ministry of Commerce data released on Friday.

    China has conflicting targets, the central banker said. "On the one hand, we need to boost consumption to adjust the economic growth structure, but on the other hand we also need to prevent excessive demand from fueling inflation," Zhou said. "We need to balance those targets so that more savings are spent, while the spending doesn't add too much pressure for inflation."

    Flexible markets

    The household savings rate needs to fall, Zhou said.

    Zhou's remarks were made to more than 300 government officials and financial executives attending the two-day financial forum, which closed Saturday.

    Also at the forum, Shanghai Vice Mayor Tu Guangshao said that the construction of developed and flexible financial markets was the key to the city building itself into an international financial center.

    "The core content for Shanghai in growing into an international financial center is to establish powerful financial markets, a link of paramount importance in the whole financial system," Tu said.

    "It differentiates Shanghai from other Chinese cities with similar goals (to build up financial centers) and assists each other to reach the goals," Tu said.

    Shanghai is home to the largest number of financial elements so far in the mainland, including stock, bond, currency, foreign exchange, futures and gold exchanges, according to Tu.

    The city has unique advantages to develop into an international financial center based on these powerful markets, said Tu, adding that the development is interactive with and helpful to other cities' growing strength in finance.

    Many Chinese mainland cities, including Shanghai, Beijing, Shenzhen and Tianjin, have unveiled plans to develop financial centers, which has aroused debates over the orientation of each city in terms of financial development.

    "Without markets of developed, complete and flexible financial elements, there would be no support for other cities to expand their financial sector as well as for the financial institutions," the vice mayor said.

    Tu outlined a few priorities that Shanghai will carry out to accelerate the pace of becoming a financial center. Key measures include pushing forward diversified financial tools and luring more participants.

    "We need a more balanced system, which means we will look to bond and fixed-income products as well as derivatives in the next phase,'' Tu said. "We need a more open and complete market, which can provide good services up to par with international standards.''

    To reach these targets, the Shanghai government will shore up efforts to improve the financial environment to move in line with policies from the central government and the supervision bodies.

    The city will try to attract more financial professionals by innovating incentive packages and establishing a market with good order and advanced risk-prevention systems, Tu said.