The People's Bank of China issued bonds worth 195 billion yuan
(US$27 billion) yesterday to soak up extra cash that banks held
after the Lunar New Year holiday.
The issue of the bonds, the largest amount in almost one year,
showed the central bank is still on a tight monetary policy to
contain the economy and inflation, said analysts.
The central bank sold three-year bills for as much as 90 billion
yuan, up from the highest single issuance of 23 billion yuan since
the beginning of this year. It also auctioned 75 billion yuan in
one-year bills and 30 billion yuan in three-month bills.
"Taken the interest gap between the yuan and the dollar after
the United States cut its rates, the central bank will rely more on
measures such as bonds and reserve requirement increases to drain
excess liquidity in the market," said Li Maoyu, an analyst at
Changjiang Securities Co.
"As the market has ample supply of money after the holiday, the
move will unlikely hit cash flow."
During the week-long Spring Festival holiday, consumers spent
255 billion yuan, up from 219.8 billion yuan in the same period
last year, according to the Ministry of Commerce.
China adopted a tight monetary policy stance after inflation
aggravated in the later half of last year.
The consumer price index, the main gauge of inflation, grew to
an 11-year high of 6.9 percent in November last year and may climb
above seven percent in January due to the worst snowstorm to hit
the country in 20 years which pushed prices, especially food.
M2, the broadest measure of money supply, rose 18.9 percent to
41.78 trillion yuan in January from a year earlier, said the
central bank yesterday. It grew at the fastest pace in 20 months
and compared with December's 16.7-percent gain.
The central bank has raised its benchmark interest rate six
times and the reserve requirement ratio 11 times since last
year.
(Shanghai Daily, February 15, 2008)
