China will continue applying consistent and moderate tightening
monetary policies in the remaining months of this year, according
to the?second?quarter conference by the monetary policy
committee of the central bank.
In the second half, the People's Bank of China (PBC) will focus
on adjustments over its foreign currency policies and management of
liquidity in the banking system. It will adopt multiple monetary
instruments to keep prices at appropriate levels. The central bank
will also target balanced growth in credit and debt, said the
conference.
According to a report released by PBC recently, China's trade
surplus has increased the country's foreign exchange reserves and
resulted in an affluence of capital and excessive liquidity since
last year.
This year, the central bank has raised interest rates twice and
required bank reserve ratio five times. However, analysts expect
further interest rate and reserve ratio hikes in the coming
months.
Last week, the Ministry of Finance was authorized to issue 1.55
trillion yuan special treasury bonds for exchange of US$200 billion
forex reserves from the central bank. The bonds, which will be
issued by PBC to institutional investors including banks, insurers
and the social security fund, will help rein in excessive capital
floating in the market to alleviate the pressure from the liquidity
problem, said Minister of Finance Jin Renqing earlier.
The conference stressed that it will improve the managed
floating rate system in its foreign exchange policy. It aims to
promote demand-and-supply-oriented market mechanism in the exchange
rate formation system, and maintain a reasonable, stable and
balanced yuan exchange rate.
(China Daily July 4, 2007)