Highlights of China's Monetary Policy
in the First Quarter of 2006
Home >> Highlights of China's Monetary Policy
in the First Quarter of 2006
On January 3, Public Announcement of the People's Bank of China
on Further Improving the Inter-Bank Spot Foreign Exchange Market
(Public Announcement of the People's Bank of China No. 1 [2006])
was issued to improve the managed floating exchange rate regime
based on market supply and demand with reference to a basket of
currencies, to promote development of the foreign exchange market,
and to diversify the mode of foreign exchange transactions and strengthen
the pricing capability of the financial institutions. According
to the Announcement, effective from January 4, 2006, OTC transactions
would be introduced in the inter-bank spot foreign exchange market
while at the same time maintaining the automatic price-matching
based transactions. Additionally, market-makers were introduced
in the inter-bank foreign exchange market to provide liquidity.
The PBC authorized the China Foreign Exchange Trade System to announce
the central parity of the RMB
against the US dollar, the euro, the Japanese yen, and the HK dollar
at 9:15 am of each business day, which would be taken as the central
rate of the RMB for transactions in the inter-bank spot foreign
exchange market (OTC transactions and automatic price-matching transactions)
as well as transactions effected over bank counters.
On January 12, the People's Bank of China, jointly with the Ministry
of Finance and the Ministry of Labor and Social Security, issued
the Notice on Improving the Guaranteed Micro-Loan Policy (PBC
Document No. 5 [2006]) to clarify the management rules for further
improving guaranteed micro-loans, accelerating the establishment
of a credit community, and promoting the building of a dynamic
mechanism to coordinate the issuance of guaranteed micro-loans,
business start-up training, and the construction of credit communities.
On January 24, the Notice of the People's Bank of China on the
Launch of RMB Interest Rate Swaps on a Pilot Basis (PBC Document
No. 27 [2006]) was published, which aimed to help investors in
the inter-bank bond market diversify risk control and asset-liability
management instruments, to resolve the structural mismatch of
assets and liabilities, and to speed up the market-based reform
of the interest rate.
On February 6, the People's Bank of China reported to the Committee
of Finance and Economy of the National People's Congress on the
implementation of monetary policy in 2005.
On February 21, the People's Bank of China published the China
Monetary Policy Report of 2005.
On February 22, the PBC authorized the National Inter-bank Funding
Center to publish the fixed interest rate of bond repo transactions
in the inter-bank bond market, which would help strengthen the
establishment of a market interest rate indicator system to enhance
the pricing-finding function of the inter-bank bond market, improve
the market yield curve, and promote the development of financial
derivatives.
On March 1, the Examination and Appraisal Committee of the People's
Bank of China on the Issuance and Redemption of the Special Central
Bank Bills for the Reform of the Rural Credit Cooperatives decided
at its fourth regular meeting to issue special central bank bills
totaling 5 billion yuan to the RCCs in 92 counties (cities).
On March 10, with the authorization of the PBC, the China Foreign
Exchange Trade System signed a cooperative agreement on the trading
of international currency with the Chicago Mercantile Exchange
(CME). Financial products introduced from the CME would help Chinese
financial institutions improve their pricing and risk management
capabilities and more effectively control risks associated with
exchange rates and interest rates.
On March 17, the Monetary Policy Committee of the People's Bank
of China held its first quarterly meeting of 2006. The Committee
agreed that the economy had maintained the steady and relatively
fast growth momentum witnessed since 2005, with the performance
of the financial sector remaining sound, the new RMB exchange
rate regime functioning smoothly, and the RMB exchange rate remaining
basically stable at an adaptive and equilibrium level. The Committee
conducted an in-depth analysis of the current economic and financial
situation both at home and abroad, and agreed to continue strengthening
and improving macro adjustments to ensure sound and relatively
fast economic growth and price stability. The Committee agreed
to continue the sound monetary policy with proper attention paid
to taking preemptive and fine-tuning measures while maintaining
consistency and stability in aggregate terms.
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