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China Steps Up Financial Reforms
China's financial sector witnessed fundamental reforms during the Ninth Five-Year Plan Period (1996-2000), according to a report issued by the State Development Planning Commission Thursday.
As the socialist market economy progresses, China is putting more weight on the use of financial policies as macro-economic leverage to sustain the country's economic growth, the report says.
During the latter part of the 8th Five-Year Plan Period (1990-1995), there were inflationary signs in some economic sectors. The government adopted measures to tighten the money supply to cool down the economy and successfully realized a "soft landing."
Since 1996, the People's Bank of China, the country's central bank, has introduced a series of policies to stimulate domestic demand and moderately increased money supply. The interest rates for deposits and loans has been lowered seven times since 1996, and the reserve fund for deposits has been reduced twice.
Statistics show that by the end of 1999, the outstanding amount of broad money (M2) was 11.99 trillion yuan, up 14.7 percent from the previous year, while that of narrow money (M1) was 4.5837 trillion yuan, up 17.7 percent.
The foreign exchange reserve grew steadily as well. By 1999, the amount hit 154.68 billion U.S. dollars. Meanwhile, the sector's opening-up has not been slowed as a result of the Asian financial crisis since 1997. By the end of 1999, 182 overseas-funded financial organizations established their offices in 23 cities and Hainan province, with total assets of over 30 billion U.S. dollars. It accounted for 1.5 percent of the country's total.
During the 9th Five-Year Plan Period, the trial regions allowed to carry out RMB businesses by overseas banks were expanded to Shanghai and Shenzhen, and all overseas financial agencies were allowed to establish offices in big Chinese cities.
The opening-up reform of the insurance sector was also promoted during the period. By 1999, China had 15 overseas insurance companies. Shanghai, Guangzhou, and Shenzhen were opened for overseas insurance businesses.
Especially noteworthy in the opening-up and reform was the announcement made by the governor of the People's Bank of China Dai Xianglong on July 21 this year.
"China will let interest rate be decided by the market in three years and, starting from September 21, make reforms in its administration of interest rates of foreign currencies," he said.
Dai also said that China will continue to open up the financial sector in the face of the imminent entry into the World Trade Organization (WTO). The sector will face both opportunities and challenges after the WTO accession.
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