Central Bank considers 'an array of policies' against US hot money

08:59, November 15, 2010      

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As worries increase that US monetary policies could send unwelcome flows of capital toward China, the Shanghai Securities News revealed that a variety of policies were being considered to stave off this hot money.

  Ma Delun, a deputy governor of the People's Bank of China (PBC), the country's central bank, said such a decision would include reserve-requirement adjustments, retooling foreign exchange positions, and open market operations.

  Earlier this month, PBC governor Zhou Xiaochuan said China's existing foreign exchange controls prevented irregular capital inflows, and proposed creating a "pool" to help lock and release capital as required.

  "The pool mentioned by Zhou does not refer to a specific market, but to an array of policies," Ma was quoted as saying Saturday.

  New quantitative easing by the US has sparked fears that the injected cash will end up overseas, pressuring countries to take steps to prevent this influx.

  Concerning the inflation rate's 25-month high in October, Ma added that this had been within expectations and that the central bank would sharpen the focus of its monetary policy to avoid inflation in the market.

  This week, the PBC has raised the reserve ratio for all banks atop a punitive hike for selected banks, as it seeks to combat excessive liquidity.

  Ma said this move would lower the money in circulation in the real economy, adding that China's exchange rate reforms would continue gradually to allow businesses to adapt.

  On Friday, the yuan was up 2.85 percent against the dollar since China's currency was depegged in mid-June.

Source: Global Times


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