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'Global boss ' false flattery for Chinese central bank (2)

By Luo Lan (People's Daily Overseas Edition)

11:03, April 30, 2012

Someone said that if PBOC is the central bank owning the largest assets, it can also be called the largest bank of USD exchange.

PBOC passively issued a large number of RMB to charge against foreign exchange and every dollar of the balance of payments surplus became the RMB in circulation, which formed huge assets on the surface. However, it reflected China’s economic pain, the imbalance of domestic and foreign demand.

China not to blamed for global flood of liquidity

As the total assets of PBOC exceeded the Fed and the newly increased M2 of China accounted for high proportion in the world, the SCB concluded that China has replaced the United States and became the major provider of the global currency liquidity. The experts disagreed to the view.

Zhang Yugui, dean of College of International Finance and Commerce of Shanghai International Studies University, said the fact that PBOC owns huge assets and China exceeded the United States in terms of M2 scale is a suboptimal choice for China, which has to passively accelerate monetization of economy under the USD-based international financial system. Therefore, it cannot be said that PBOC has replaced the Fed and became the world’s central bank and China has become the major provider of global currency liquidity.

Experts said that the RMB can neither flow freely in the world nor be as the reserve currency of other countries. Therefore, the newly increased M2 of China does not have the ability to cause liquidity on a global scale.

Zhang Tao, doctor of economics, said that the PBOC’s assets are a passive increase and that of central banks of developed countries including the Fed is a voluntary increase. Meanwhile, the passively increased RMB mainly flow in China due to non-freely exchange of RMB. Although the offshore RMB market has a rapid development in recent years, the capacity of the market is small.

False flattery

With China getting stronger and stronger, some ill-disposed interest groups of Western countries no longer poured sewage like in the past but changed the way. They first flattered China and let it assume some extra responsibilities so as to reach their purpose.

According to Wang Peng, expert of the China Center for International Economic Exchanges, the SCB said that PBOC is the central bank of the world. Once the view is widely disseminated in the international economic community, people are likely to blame the inflation pressure and rising prices in some other countries on the overflowed liquidity of RMB. It will have a negative influence on China.

Then, who caused the global inflation? The experts said that it is still the USD.

Finance commentator Yu Fenghui pointed out that as international reserves and currency of payment, the USD can freely flow in the world. Desperately issuing the USD affected other countries and led to inflation. However, in China, due to the control of RMB exchange rate and that the RMB is not the international currency, a large number of RMB can only flow in China and the inflation is bore by Chinese people.

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