Central bank to maintain renminbi interest rate
( 2003-06-24 08:58) (China Daily)
The People's Bank of China Monday ruled out the possibility of an
interest rate rise in the near future, although it is considering curbing
excessive money supply.
The central bank said its monetary policy
committee believed the renminbi's interest rate should be maintained.
It
was part of the resolution of a recent meeting of the committee. But a central
bank statement did not specify when the meeting took place.
Earlier this
month, the central bank said it felt an overly rapid money supply, mainly caused
by the rapid growth of credits, in the past few months and worried it would lead
to increasing risks and an overheated economy.
But the bank appeared to
be reluctant to slow down money by increasing the interest rate because it
feared it would add burden to domestic enterprises, which are struggling against
persistent low price levels.
The central bank said earlier this month
that it would adjust the legal reserves ratio to put the brakes on the
stronger-than-desired money supply. Commercial banks are required to put in the
central bank's coffers a set proportion of the deposits they drew from
institutions and private individuals. This money is called legal
reserves.
The central bank also said it would intensify open market
operation, which is about the central bank's trading of treasury bonds (T-bond)
with commercial banks. Under the current situation, the central bank should sell
its T-bond holdings to reduce money available at the credit market.
The
committee also believed renminbi's exchange rate should also be kept stable, the
central bank said in the statement.
The committee is headed by the bank's
Governor Zhou Xiachuan and consists of officials from major economic departments
of the central government, heads of banking industry's association and academic
representatives.
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