5. Cost of central bank forex sterilization exceeds 1 trillion RMB

Foreign exchange sterilization measures taken by China's central bank from 2003 to 2010 cost it more than a trillion yuan.

Foreign exchange sterilization measures taken by China's central bank from 2003 to 2010 cost it more than a trillion yuan, China Business News reports. According to the paper's calculations, interest paid on central bank notes issued from 2003 to 2010 totaled 743.65 billion RMB. And interest paid on bank reserves added due to increases in the required reserve ratio over the same period cost the bank 339.41 billion RMB. These figures are a reminder that foreign exchange market intervention and the foreign exchange sterilization system bear fiscal costs, and these costs may impact the central bank's balance sheet, perhaps even influencing monetary policy formulation and implementation, Huang Yiping, a professor at Peking University's National School of Development, told China Business News. Massive sterilization costs indicate the current model is not sustainable, Huang added.