The People's Bank of China (
PBOC) governor Zhou
Xiaochuan announced at a press conference Thursday that the bank
plans to "push steadily ahead with RMB convertibility under the
capital account, further develop the foreign exchange market,
improve the mechanisms for determining the RMB exchange rate and
keep the RMB exchange rate basically stable at an adaptive and
equilibrium level."
Zhou held the press conference in conjunction with the annual
session of the national legislature together with Liu Mingkang,
president of the China Banking Regulatory Commission (CBRC).
The PBOC also plans in 2004 to strengthen coordination of its
domestic and foreign currency policies, and better monitor and
manage short-term capital flows.
Zhou ruled out the possibility of an interest rate hike this
month, as the current rise in the consumer price index (CPI) has
not yet reached a level that warrants it.
"As for the policy for next month or further in the future, we
have to make further observations," said Zhou.
The central bank has adopted a series of measures to guard
against possible inflation since last year. To strengthen macro
controls, the central bank will make timely, proper adjustments to
monetary policies according to changes in the situation, Zhou
stated.
Although no timetable has been set for the Bank of China and
China Construction Bank -- two of China's Big Four state-owned
banks -- to be listed, Zhou said that efforts will be made to turn
them into modern commercial banks in three years.
CBRC president Liu Mingkang said that the institutions will be
turned into internationally competitive joint-stock commercial
banks featuring capital adequacy, strict internal control, safe
operation and good performance.
Earlier this year the Chinese government, for the first time in
history, injected US$45 billion of its foreign exchange reserve in
the two banks to help increase their capital adequacy ratios.
"But the key to success lies in the transformation of their
operational mechanisms," Liu said.
This means the two banks should establish a good corporate
governance structure, introduce overseas strategic investors, map
out a clear-cut development strategy and cultivate a sound risk
control and internal control mechanism, he added.
The CBRC president spoke highly of the four asset management
companies, formed in 1998, in promoting banking reform. He said
they had contributed to lowering the non-performing loans (NPLs) of
the big four state-owned commercial banks by 10 percentage points
in 1999 - 2000.
Overall, China’s major banking institutions slashed the ratio of
NPLs by 5.3 percentage points to 17.8 percent last year. The major
financial institutions cut their NPLs by 190.6 billion yuan
(US$23.1 billion) to 2.44 trillion yuan (US$295 billion) at
year-end.
According to Liu, loans to individuals and private companies
from Chinese banks have been increasing by an annual average of 50
percent in recent years and the quality of these loans is generally
good.
As China's private economy is still in its infancy, the country
also needs to risk investment funds to finance private companies,
high-tech ones in particular, Liu noted.
He also called for a further improvement of the legal
environment for the development of private businesses.
Liu reported that the CBRC had punished 1,242 banking
institutions at various levels and penalized 3,251 bank employees
who violated financial regulations in the past year. It also
strengthened its off-site surveillance function while monitoring
economic and financial developments so as to promptly identify and
signal potential risks.
In the past year, China also stepped up efforts to combat
counterfeiting, confiscating 656 million yuan and US$5.1 million in
bogus banknotes.
Currency management was also strengthened, with a total of 9,007
financial institutions found violating cash management regulations
last year.
(Xinhua News Agency March 11, 2004)