China Monetary Policy Implementation Report (Third Quarter of 2004)

Author: Monetary Policy Analysis Group of the People's Bank of China
Publisher:
Publish Date: 2005-01-01
Features: Since 2004, the global economy has maintained a relatively strong growth momentum. China's economy has achieved steady and rapid growth with improved efficiency. Macro-control has achieved phased results, and the rapid growth trend of fixed-asset investment has been preliminarily curbed. The operation of monetary and credit has continued to align with the expectations of financial regulation. In the first three quarters, the gross domestic product (GDP) reached 9.3 trillion yuan, a year-on-year increase of 9.5%, accelerating by 0.6 percentage points compared to the same period last year. In accordance with the unified deployment of the Party Central Committee and the State Council, the People's Bank of China has continued to implement a prudent monetary policy, strengthened and improved financial regulation, reasonably controlled the growth of monetary and credit, focused on optimizing the credit structure, actively improved the institutional construction of macro-financial regulation, and accelerated the reform of financial enterprises.
1. Flexibly carry out open market operations;
2. Raise the required reserve ratio for deposits again;
3. Adjust the benchmark interest rates for deposits and loans of financial institutions;
4. Further promote interest rate liberalization reforms;
5. Implement floating interest rate systems for rediscount loans and differential required reserve ratios;
6. Strengthen "window guidance" for commercial banks to promote the optimization of loan structures;
7. Vigorously develop financial markets;
8. Actively promote the reform of financial enterprises;
9. Promote balance in international payments and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
Overall, financial operations are healthy and stable. By the end of September, the broad money supply (M2) stood at 24.4 trillion yuan, a year-on-year increase of 13.9%, with the growth rate rising by 0.3 percentage points compared to the previous month but falling by 6.7 percentage points compared to the same period last year. In the first three quarters, the total loans of all financial institutions in RMB increased by 1.8 trillion yuan, a year-on-year decrease of 669.7 billion yuan, but an increase of 439.9 billion yuan compared to the same period in 2002. The credit structure has further improved, with loans for fixed assets such as basic construction continuing to be controlled, while working capital loans have gradually increased. Money market interest rates remained generally stable. By the end of September, China's foreign exchange reserves stood at 514.5 billion U.S. dollars, with the RMB exchange rate at 1 U.S. dollar to 8.2766 yuan, maintaining stability.
Currently, macro-control is still in a critical phase. It is necessary to continue closely monitor the trends of various price indices, prevent a rebound in investment, and strive to consolidate and develop the achievements of macro-control. In the next phase, the People's Bank of China will continue to implement a prudent monetary policy, control the total volume of monetary and credit reasonably in line with the requirements of improved and strengthened financial regulation, focus on optimizing the credit structure, and further play the important role of finance in macro-control.
1. Flexibly use various monetary policy tools to maintain reasonable growth in monetary and credit;
2. Conduct "window guidance" in a timely manner to guide commercial banks in optimizing the credit structure;
3. Steadily advance interest rate liberalization to optimize the interest rate term structure;
4. Accelerate the reform of financial enterprises to enhance competitiveness;
5. Further promote the development of financial markets to optimize resource allocation;
6. Maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.