"China's central bank is concerned with the current fluctuation
of asset prices; however, it will not implement control measures
targeting the fluctuations," said Wu Xiaoling, vice governor of the
central bank, at a financial forum hosted by the leading financial
magazine Caijing.
She stressed that prudent and moderately tight monetary policies
are conducive to the sound development of the capital market.
The central bank needs to put money market interest rates within
a bracket and will adopt various monetary tools to absorb liquidity
based on the interest rate adjustment, Wu explained.
"Issuing special treasury bonds is another tool that can absorb
excess liquidity. There is no need for the market to panic," she
said.
In an open market, the issuance of special treasury bonds and
central bank bills to control base currency has the same effect. In
China the central market must serve as the operator in order to
keep the macro-goals of interest rates and foreign exchange rates
consistent.
Whether to choose an open market tool or the deposit reserve
ratio is dependant on their impact upon the market interest rate,
Wu said.
For more details, please read the full story in Chinese (
http://www.china-cbn.com/s/n/000002/20070914/000000078778.shtml).
(China.org.cn September 14, 2007)
