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Senior official: stock market should not overreact to monetary policy adjustments
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10:30, September 21, 2009

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Wu Xiaoling, deputy head of the financial and economic committee under the top legislature, said on September 20 that China's stock market should not overreact over central bank's short-term monetary policy adjustments. The development of the stock market calls for diversified market entities and more trading instruments.

She said that the development of the capital market should rely on market reform and innovations, rather than the central bank's policy adjustments. Currently, China's household deposits reached 25 billion yuan and total deposits have exceeded 40 billion yuan. China's capital market has good liquidity but lacks confidence and good enterprises.

She noted that market liquidity represents assets ability to realization. China's capital market should avoid systemic risks, lower leverage ratio and serve the real economy. Wu also called for diversified market entities. "Homogenized competition will inevitably lead to liquidity risks."

Market-oriented measures are needed to strengthen liquidity management, said Wu. She urged the commercial banks to follow the prudential regulations and requirements, in order to achieve the banks' sustainable developments and shoulder their social responsibilities.

By People's Daily Online

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