Central Bank Governor Vows to Keep Yuan StableChina's central bank governor Dai Xianglong said Thursday that Beijing's monetary policy would be aimed at maintaining the stability of the yuan as the country enters into the World Trade Organization (WTO)."Sound monetary policy will continue to maintain the value of the Chinese yuan, and hence promote economic growth," Dai told a forum on China and Globalization in Beijing. "The forecast for the next five years shows that money supply growth will be slightly higher than the sum of GDP growth and the inflation rate, the rate of growth in bank loans will fall slightly, however the proportion of indirect financing on the capital market will increase." Dai said China's expected entry into the WTO would coincide with ongoing financial reforms aimed at liberalizing interest rates, establishing a truly commercial banking system and improving China's single managed floating exchange rate regime. "China implemented current account convertibility in 1996. With China's accession to the WTO, we will press ahead with the capital account convertibility process gradually," he said. Commercial banking reforms would be deepened as a vast amount of non-performing loans in state commercial banks would be taken over by asset management companies, while insolvent financial institutions would be closed, he said. "By the end of 1999, the total assets of financial institutions subject to the supervision of the People's Bank of China amounted to 17.2 trillion yuan (US$2.07 trillion)," Dai said. Western bank analysts estimate that between 25 and 40 percent of the loan assets in China's four major state banks are bad debts wracked up through support of lumbering state-owned enterprises. Dai also called for improvements in the international monetary system in order to avoid financial crises and to help narrow the gap between the developing and developed countries. China welcomed the establishment of the G-20 informal dialogue mechanism and supported a greater role for the International Monetary Fund to prevent future financial crises and provide liquidity assistance in times of crises, he said. "The monopoly by a handful of developed countries on the rule-making in the international financial field must be changed," he said. |
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