Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2009/200901/20090101/article_386636.htm
Central bank in call for more tools to tackle financial crisis
Created: 2009-1-1
Author:Li Yanping
CHINA'S central bank says the nation should prepare more tools to tackle the global financial crisis, a month after its biggest interest-rate cut in 11 years.
Measures may be needed "to ensure the security and stability of China's financial system," the People's Bank of China said on its Website after a quarterly monetary-policy meeting.
A slowdown in the world's fourth-biggest economy is deepening because of waning export demand. Lower interest rates and a halt in gains by the yuan against the dollar have brought an additional risk: an exodus of cash from the financial system as investors seek better returns elsewhere, Bloomberg News said.
"The central bank has grown more concerned about risks of capital outflows," said Xing Ziqiang, an economist at China International Capital Corp in Beijing.
China's foreign-exchange reserves, the world's largest, fell for the first time in five years because of the crisis, Cai Qiusheng, an official at the nation's currency regulator, said on December 20. The reserves stood at US$1.9 trillion at the end of September.
China's key one-year lending rate stands at 5.31 percent after five reductions in three months.
The yuan's gains against the dollar have stalled since mid-July and the currency this month had its biggest one-day decline since a fixed exchange rate was scrapped in 2005. A weaker currency helps exporters by keeping down prices in overseas markets.
The central bank pledged to promote "steady" growth in lending and money supply and ensure sufficient liquidity in the financial system.
China aims to expand new yuan loans by 4.6 trillion yuan (US$674 billion) in 2009, China National Radio reported, citing Liu Shiyu, a vice governor of the bank.
"China's economic fundamentals and long-term growth trend haven't changed, despite the challenges and difficulties from home and abroad this year," the central bank said. Economic policies "should center around boosting consumption," it said.
China's economic growth may have slipped to 5.5 percent this quarter, the weakest pace in at least 15 years, according to Shanghai-based Industrial Bank Co. The government is targeting a minimum 8-percent expansion each year to create jobs and maintain social stability.
The central bank reaffirmed it will maintain a "moderately loose" monetary policy and keep the yuan "basically stable."
"The central bank has exhausted its options for encouraging growth and will play a supporting role, rather than a dominant role, in bolstering domestic consumption," said Xing. "More aggressive rate reductions may spur expectations that the yuan will fall, thus causing more capital outflows."
Measures may be needed "to ensure the security and stability of China's financial system," the People's Bank of China said on its Website after a quarterly monetary-policy meeting.
A slowdown in the world's fourth-biggest economy is deepening because of waning export demand. Lower interest rates and a halt in gains by the yuan against the dollar have brought an additional risk: an exodus of cash from the financial system as investors seek better returns elsewhere, Bloomberg News said.
"The central bank has grown more concerned about risks of capital outflows," said Xing Ziqiang, an economist at China International Capital Corp in Beijing.
China's foreign-exchange reserves, the world's largest, fell for the first time in five years because of the crisis, Cai Qiusheng, an official at the nation's currency regulator, said on December 20. The reserves stood at US$1.9 trillion at the end of September.
China's key one-year lending rate stands at 5.31 percent after five reductions in three months.
The yuan's gains against the dollar have stalled since mid-July and the currency this month had its biggest one-day decline since a fixed exchange rate was scrapped in 2005. A weaker currency helps exporters by keeping down prices in overseas markets.
The central bank pledged to promote "steady" growth in lending and money supply and ensure sufficient liquidity in the financial system.
China aims to expand new yuan loans by 4.6 trillion yuan (US$674 billion) in 2009, China National Radio reported, citing Liu Shiyu, a vice governor of the bank.
"China's economic fundamentals and long-term growth trend haven't changed, despite the challenges and difficulties from home and abroad this year," the central bank said. Economic policies "should center around boosting consumption," it said.
China's economic growth may have slipped to 5.5 percent this quarter, the weakest pace in at least 15 years, according to Shanghai-based Industrial Bank Co. The government is targeting a minimum 8-percent expansion each year to create jobs and maintain social stability.
The central bank reaffirmed it will maintain a "moderately loose" monetary policy and keep the yuan "basically stable."
"The central bank has exhausted its options for encouraging growth and will play a supporting role, rather than a dominant role, in bolstering domestic consumption," said Xing. "More aggressive rate reductions may spur expectations that the yuan will fall, thus causing more capital outflows."
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