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'Global boss ' false flattery for Chinese central bank

By Luo Lan (People's Daily Overseas Edition)

11:01, April 30, 2012

Edited and Translated by People's Daily Online

Chinese central bank was recently labeled as the global “boss” in the banking industry.

The latest report from the Standard Chartered Bank (SCB) shows that the total assets of People's Bank of China (PBOC), the Chinese central bank, grew by 119 percent in the past five years, reaching 28 trillion yuan (about 4.5 trillion U.S. dollars) at the end of 2011. Its asset size exceeded the Federal Reserve Board and the European Central Bank (ECB) and became the central bank managing largest assets scale in the world.

The Chinese central bank at once received flattery from all sides.

The SCB report said that the main provider of global currency liquidity now is PBOC. Zhou Xiaochuan is not only the governor of Chinese central bank but also the governor of global central banks.

Although PBOC was suddenly crowned with the title of global “boss”, insiders warned that do not be dazzled by the superficial figures and flattery. Whether it is the global “boss” depends on the asset quality and structure of the central bank and people should be very vigilant on the conspiracy of interest groups behind.

Economic pain behind huge assets

We can see from the balance sheet of PBOC that more than 80 percent of its total assets are foreign exchange assets at the end of 2011.

The SCB report said that the increment of broad money supply (M2) of China accounted for 52 percent of that of the world’s M2 in 2011, which clearly shows that in recent years much of the world’s newly increased currency supply is from China. The experts said that the excess currency is related with the foreign exchange assets of PBOC.

Zhang Monan, associate researcher of the World Economy Research Office under the State Information Center, said that China has been maintaining foreign trade surpluses for 30 years. In order to cope with the huge amount of foreign exchange inflows and maintain the stability of RMB exchange rate, China developed a compulsory settlement of exchange, requiring enterprises or individuals selling their foreign exchanges earned in foreign trade to the banks appointed by the state. The RMB used to buy the foreign exchanges is called funds outstanding for foreign exchange. After the money enters into the bank credit system, it will create several fold currency due to the money multiplier effect.

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Leave your comment3 comments

  1. Name

PD User at 2012-05-0170.180.94.*
I read parts of your online publication almost every day. You are to be commended for giving the world a view of China. I agree with Wende ... the west is using trolls to try to influence Chinese opinion and cause civil unrest in an effort to weaken the cohesion of the Chinese public. Pay no attention to these people. The western media is definitely the lapdogs of their respective governments. Best Wishes to you.
Fred C at 2012-05-0124.141.36.*
Excellent, great and worthy news! Thank you.
wende at 2012-04-3071.251.45.*
Chinese need to realize that Westerners are good at praising to get what they want. Chinese are vulnerable to praises and westerners know that. It is like coaxing a woman to go to bed with you. Many a times, they will dump you after they got what they want.

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