China Shows Signs Of Economic Recovery
An official from the central bank of China revealed today that the country still has room to implement further interest rate cuts should this become necessary in dealing with the global financial crisis. This room to move has been somewhat restricted by the five reductions that have already been made in the benchmark deposit and loan interest rates since September 2008, but it nevertheless still exists, according to the Vice Governor of the People’s Bank of China, Su Ning. He further confirmed that there is still space for monetary policy adjustments, including cutting the reserve requirement ratio that is currently in place.
Generally referred to as the “central bank”, the People’s Bank of China (PBC or PBOC) controls monetary policy and regulates financial institutions in mainland China. The Governor of the bank, currently Zhou Xiaochuan, is nominated by the Premier of China, currently Wen Jiabao, and is then approved by the National People’s Congress. Interestingly, the PBOC has more financial assets than any other public finance institution in recorded history globally.
On Friday Zhou Xiaochuan announced that policies which have been put into place to date to combat the global financial crisis have achieved “significant results”. So significant have been these results that economic figures are not only stabilizing, but are showing signs of recovery. Zhou noted that officials have to avoid being what he termed as “slow-handed” or “light-handed” in responding to the crisis and should rather “err on the side of being quick and decisive”. Earlier in the day the central bank reemphasized its commitment to keeping the exchange rate of the yuan steady, and allowing market forces to play a greater role in determining interest rates.
These remarks from the PBOC Governor reflected the determination of Premier Wen Jiabao, who on Thursday noted that China would make every effort to reach its target of an 8 percent growth in the economy. This figure of 8 percent is widely considered to be the minimum the country needs in order to keep China’s jobless rate down – a high priority for Beijing which wants to avoid social unrest being triggered by rising job losses.
Authorities in China have been monitoring, and drawing lessons from, the manner in which other countries have dealt with the financial crisis. The PBOC has reaffirmed its determination to maintain financial stability in China, which includes strengthening policies regarding the monitoring and assessment of the country’s financial sector.