“China will promote market-oriented reform of interest rate, set up an interest rate system with a benchmark rate determined by the central bank. The money market rate will be the transmission vehicle and the deposit and the loan rates will be determined by the market,” disclosed Dai Xianglong, governor of the People’s Bank of China, in his speech at the 21st Century Forum recently.
He stated that China is to join WTO in the near future and in the past five years, foreign financial agencies in China have been given national status in terms of market and investment opportunities. Opening up of China’s financial section will enter a new stage.
In his speech, Dai outlined the steps China will take towards commercial banking system for the next five years.
Unhealthy loans of national commercial banks will be separated from normal banking operations, and a few financial institutions in serious difficulties will be closed;
Capital funds will be infused timely to national commercial banks through a number of channels;
Eligible national commercial banks will be transformed into joint-equity corporations with the government as the dominant shareholder; and
Supervision and coordination of banks, securities and insurance institutions will be strengthened and improved.
Simultaneously, China will raise the technical levels of financial industry, support commercial banks to blaze new trails and to start intermediate operations;
China is to open the financial market wider and to further improve the single, controlled floating exchange rate mechanism on the basis of market supply and demand; and
China will continue a steady monetary policy; keep stabilizing the value of Renminbi to enhance the economic growth.
The bank governor also stated that in the next five years, growth in money supply in the next five years is estimated to be slightly higher than that of GDP growth and inflation rate; growth of loans will fall while direct financing through capital market will rise tangibly.
(China Economic Times, June 16, 2000)
