Central Bank to Maintain Renminbi Interest Rate

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Last updated at: (Beijing Time) Tuesday, June 24, 2003

Central Bank to Maintain Renminbi Interest Rate

The People's Bank of China Monday ruled out the possibility of an interest rate rise in the near future, although it is considering curbing excessive money supply.

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The People's Bank of China Monday ruled out the possibility of an interest rate rise in the near future, although it is considering curbing excessive money supply.

The central bank said its monetary policy committee believed the renminbi's interest rate should be maintained.

It was part of the resolution of a recent meeting of the committee. But a central bank statement did not specify when the meeting took place.

Earlier this month, the central bank said it felt an overly rapid money supply, mainly caused by the rapid growth of credits, in the past few months and worried it would lead to increasing risks and an overheated economy.

But the bank appeared to be reluctant to slow down money by increasing the interest rate because it feared it would add burden to domestic enterprises, which are struggling against persistent low price levels.

The central bank said earlier this month that it would adjust the legal reserves ratio to put the brakes on the stronger-than-desired money supply. Commercial banks are required to put in the central bank's coffers a set proportion of the deposits they drew from institutions and private individuals. This money is called legal reserves.

The central bank also said it would intensify open market operation, which is about the central bank's trading of treasury bonds (T-bond) with commercial banks. Under the current situation, the central bank should sell its T-bond holdings to reduce money available at the credit market.

The committee also believed renminbi's exchange rate should also be kept stable, the central bank said in the statement.

The committee is headed by the bank's Governor Zhou Xiachuan and consists of officials from major economic departments of the central government, heads of banking industry's association and academic representatives.

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