China to Continue Prudent Monetary Policy: Official

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Last updated at: (Beijing Time) Saturday, November 30, 2002

China to Continue Prudent Monetary Policy: Official

China will continue to follow a prudent monetary policy next year and the growth of commercial loans and the money supply will be kept at the same level as this year, a senior researcher with the People's Bank of China (PBOC) said Thursday in Beijing.

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Xie Ping, head of the Research Bureau of PBOC, lately talked about China's 2002-2003 monetary policy at "2002 China's Information Economy Annual Meeting" held.

PBC will still stick to a constant stable exchange rate of Reminbi in 2003. The go-ahead is to be sought at the Central Financial Meeting Q1 coming month, Xie said. Relevant plans will be submitted to the upcoming People's National Congress for deliberation March coming year. More loans will be issued to ensure adequate money supply from 1.5 to 1.6 trillion yuan: M1, 15%; M2, 10%.

Xie further told that PBC is to keep a 1.89% bottom interest rate and no more a cut is to be considered. Though a higher discount rate has been kept yet a possible reduction of it is excluded. Meanwhile, Xie turned down the babble about a so-called currency deflation by China that had led to an overall currency deflation of the world.

Less money from direct financing

Xie told that China claims in the past 11 months this year merely a 5% against an overall 8% amount of fund raised during the same period of last year and an ever as much high as 10% of fund from direct financing. This is to say the Central Bank deems an obviously weaker securities market falls on China this year than last.

According to Xie, no enterprises should be advised from a burdening debt of bank loans to be borrowed. It is advisable to make most of the capital market and have funds from direct financing as things have been made available for directing or indirect financing in the developed countries. Up until October this year merely a sum of 73.6 billion yuan against 48 billion yuan as reported had been raised from China's capital market to show a 5% less than 8% last year. Xie said there is no way to talk about a capital market run on the track of international market when funds are raised by way of irrational stock financing.

Over 8.47 trillion yuan deposits in banks

When making a moderate criticism of the capital market and the babble about an overall economic growth from "a currency inflation in China", Xie pointed out the crucial cause by using specific statistics of residents' bank deposits to drive home his point. First, the residents' deposits this year will be up 1.2 trillion yuan to add to an expected total of over 8.47 trillion yuan of deposits by the end of this year and a larger growth of these is even being expected.

Xie said a recessive stock market and a cut of price index lie in the fact most ordinary Chinese tend to choose investment for safety's sake. On the one hand, stock investment demands scale effect. China commands merely a per-capita average of less than 10 thousand yuan of wealth, at a level less than one 60th of Japan. This is to say when people are still not in an affluent position to dispose of their wealth on a large scale there will be no way to talk about a rise of the awareness to go in for risk investment.

Statistics tell China commands at present an overall disposable fund of 11 trillion yuan by individuals and when adding in the amount of fixed assents the fund is at an approximate amount of 26 - 27 trillion yuan. Of the 11 trillion yuan, 71.79% are bank deposits; 11.20%, cash. In terms of marketable securities, T-bonds account for 5.80%, stock 7.70%. In addition, insurance fund takes 2.00%, residents' insurance assets 1.7%.

By People's Daily Online

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