In 2001, the People's Bank of China (PBOC) will continue to pursue the sound monetary policy. Stability, continuity and forward-looking manner will characterize the policy implementation, according to Dai Xianglong, governor of PBOC.
Dai made these remarks at a press conference sponsored by the State Council Information Office on January 17.
Premature change of policy stance will be avoided so as to consolidate the momentum of the economic rebound. The PBOC will closely monitor economic developments, especially price movements and timely adjust money supply by using diversified policy instruments to maintain the stability of domestic price and exchange rate, he said.
The implementation of the sound monetary policy in 2000 contributed greatly to the rebound of the economy. Broad money (M2) reached 13.5 trillion yuan at end of 2000, up 12.3 percent from the previous year or 14 percent if the individual and corporate deposits placed with banks by the securities firms were included. Narrow money (M1) reached 5.3 trillion yuan, up 16 percent. Currency in circulation reached 1.47 trillion yuan, up 8.9 percent.
The liquidity ratio (M1/M2) was 39.5 percent at the end of 2000, the highest since 1997. The excess reserves of the financial institutions averaged at 8.3 percent, indicating strong payment capacity.
The aggregate loan balance of all financial institutions amounted to 9.9 trillion yuan, up 1.3 trillion yuan or 13.4 percent, representing an increase of one percentage point over 1999.
The loan increase in 2000 mainly consisted of mortgage and consumer credit, financing of state infrastructure projects and agriculture loans. Mortgage loans increased by 195.2 billion yuan. Other consumer credit increased by 64 billion yuan. Credit to non-state-owned enterprises accounted for 48 percent of aggregate credit, up two percentage points.
With the supervision and coordination of PBOC, the asset management companies purchased 1.4 trillion yuan of non- performing assets from the wholly state-owned commercial banks and completed the conversion of 400 billion yuan into equity.
In reply to a question about Euro in China’s foreign reserves, Dai said that Euro has been undervalued and it is expected to have a good price this year.
Though Euro has a dramatic depreciation, China does not suffer any actual loss because China reserves Euro for settlement with European countries.
There is no statistics available on whether specific enterprises have suffered losses from Euro depreciation, and if any, the figure should be quite moderate, he said.
In 2001, according to Dai, PBOC will implement the various monetary and credit policy measures and promote the reform of the state-owned enterprises and the strategic structural adjustment of the economy.
Appropriate money growth is expected to provide sufficient money for domestic economic development. The interest rate mechanism will be further improved so as to strengthen the PBOC’s capacity of influencing market interest rates. Efforts will also be made to improve open market operations, standardize interbank debt securities market and diversify debt instruments, said the PBOC governor.
Punishment of deliberate credit delinquencies will be enforced with policy and legal measures and market discipline will be strengthened by such measures as public disclosure of delinquent debtors. Measures will be taken to prevent the use of bank loans for illegal speculation in the stock market. Bank credit information system will be improved.
The PBOC will exercise stringent supervision on commercial banks with respect to non-performing loan ratios, rates of return on capital and capital adequacy, said Dai. He added that the bank will continue to encourage the small and medium-size commercial banks and credit cooperatives to expand their business steadily in the process of the reform.
(CIIC by Xu Zhiquan 01/18/01)
