The central bank chief yesterday sought to reassure investors
that the domestic stock market was not in the middle of a downward
trend and that the country would increase the part direct financing
played in the financial system.
"The dramatic fall in the stock market (last month) ... is not a
macroeconomic-level problem and should not lead to a change of
trend," said Zhou Xiaochuan, governor of the People's Bank of
China.
The sell-off at the end of last month, which began when prices
of Shanghai A shares fell by more than 8 percent, has been blamed
for triggering a decline in share prices across the globe.
However, Zhou said numerous factors could have caused the
fluctuations.
"There are many possibilities (to explain the fluctuations)," he
added.
He also said China would continue to increase the role direct
financing played in the capital market and to build the market in
line with international standards so "people ... can better cope
with any changes."
Zhou said other countries, including the United States, also
suffer from problems caused by excess liquidity.
He added that market regulators should adopt a prudent and
"slightly tightened" policy.
At the end of last month, China's M2, a broad measure of money
supply, was up 17.8 percent from same period a year ago and 1.9
percentage points higher than the previous month, the central bank
said on its website yesterday.
M1, which covers currency and checking accounts, was up 21
percent year-on-year at the end of last month, while M0, or cash in
circulation, increased by 25.1 percent from a year earlier,
compared with a year-on-year decline of 4.8 percent at the end of
January.
The sharp rise in M0 was largely the result of the late Chinese
New Year holiday this year, the central bank said.
The holiday generally distorts economic figures. It fell in the
middle of February this year and in mid-January last year.
Outstanding yuan loans amounted to 23.5 trillion yuan (US$3
trillion) at the end of last month, representing a 17.2 percent
year-on-year increase, which was more or less in line with previous
trends.
Zhou also said details on how a batch of yuan-denominated bonds
would be issued in Hong Kong were under preparation and "may come
out quite soon".
He also said the central bank was wrapping up preparations for
market-oriented interest rate reforms for rural credit cooperatives
and other rural financial institutions. Moreover, the authorities
are planning to impose a differentiated reserve ratio on rural
credit cooperatives to encourage them to improve lending
efficiency.
Asked about the cross-Straits financial situation, Zhou said:
"the mainland wanted to work with Taiwan, but cooperation had been
hampered by the repeated attempts at 'Taiwan independence'. We will
continue to work in that direction (of pushing cross-Straits
financial service exchanges)."
(China Daily March 13, 2007)