There is no current threat to the normal functioning of China's
financial system, said central bank Governor Dai Xianglong
yesterday.
Dai acknowledged that financial risks exist in China's financial
industry largely as a result of the large number of non-performing
loans (NPLs) its banks amassed during the planned-economy era, said
Dai, governor of the People's Bank of China (PBOC).
"China's financial industry, now and in the future, will continue
its steady and safe operations," Dai said at a seminar organized by
the Euromoney Conferences, a division of Euromoney Institutional
Investor PLC.
"Any pessimistic view is untenable," Dai said at the seminar called
The China Conference: the Year of Capital.
The two-day seminar, co-hosted by the Industrial and Commercial
Bank of China and the Hong Kong and Shanghai Banking Corp Ltd (HSBC), opened yesterday and drew
more than 700 participants from 24 countries.
Some Western analysts have long held views that China is facing an
imminent financial crisis, citing the NPL ratio at its state-owned
commercial banks as a primary concern, experts said.
Earlier this year Dai said the average NPL ratio at China's
state-owned commercial banks was about 26 percent. That is far from
enough to shake other robust parts of its financial system and the
overall economy, he said.
The NPL ratio also dropped by 3.9 percentage points last year and a
further 3.3 percentage points in the first nine months of this
year, Dai added.
"The risks accumulated over the years have been contained, and is
gradually being reduced," the governor said.
Rapid economic growth, which he said would hit 7.8 percent this
year and will have no problem reaching an average of 7 percent in
the coming 10 years, give strong support in preventing financial
risks.
Dai also said the renminbi has strengthened by 44 percent against
the US dollar and 5 percent in real terms since 1994.
Foreign reserves also rose to US$274 billion at the end of
November, equivalent to 10 months of China's import value, he
added.
Foreign debt also continues to decline, with around US$160 billion
outstanding at the end of June, Dai said.
Savings deposits also hit a hefty 9.2 trillion yuan (US$1.1
trillion) at the end of October, securing commercial banks'
liquidity needs, he said.
In
the future, Dai said China will steadily promote the full
convertibility of the renminbi to foster orderly movement of
international capital. The currency is now convertible on the
current account and 75 percent of the entries on the capital
account.
China's strategy of opening up which balances integrating with the
rest of the world and fending off risks is successful, he said.
Dai reiterated that the renminbi's current exchange rate is
appropriate, but said the government will try to optimize the
mechanism through which the rate is determined using stable
measurements and keeping with "new circumstances in international
capital flows."
(China Daily December 5, 2002)