BEIJING (MNI) – Chinese central bank Governor Zhou Xiaochuan’s
“pool” to contain short-term inflows of speculative “hot money” is a
combination of monetary policy tools including the deposit reserve
requirement and adjustments to the amount of foreign currency banks are
forced to hold, the Shanghai Securities News reported, citing Ma Delun,
a vice-governor of the People’s Bank of China.
Zhou referred to the establishment of a “pool” for hot money in
comments earlier this month outlining the PBOC’s strategy to defend
China’s economy against the liquidity impact of a fresh round of
quantitative easing by the Federal Reserve.
“The pool is actually a combination of policy tools, including
adjustments in the deposit reserve requirement, open market operations
and requirements on bank foreign currency positions,” Ma told the
newspaper in an interview in Shanghai.
He said the central bank’s reserve requirement will not only drain
money out of the banking system but also will reduce the money
multiplier to influence liquidity growth.
The Chinese central bank raised the bank deposit reserve
requirement by 50 basis points last week, marking the fourth increase
this year.
The increase came a day after the State Administration of Foreign
Exchange (SAFE) issued a rule forcing banks to hold long dollar
positions overnight in an effort to ease the central bank’s steriization
burden.
beijing@marketnews.com
** Market News International Beijing Newsroom +86-10 5864 5241**
[TOPICS: M$Q$$$,M$A$$$,M$$FX$,MMQPB$,MT$$$$,MMUFE$]
