Monetary Policy - China

What was the name of the bank established in 1948 by the Communist party?

PBoC

What was the role of the PBoC bank?

It served entire Chinese financial system as a central bank as well as commercial bank.

What the commercial bank PBoC was divided into?

Bank of China, the People’s Construction Bank of China, the Agricultural Bank of China and the Industrial and Commercial Bank of China.

What happened in 2003?

In 2003, the China Banking Regulatory Commission was established to take over from the PBoC the role of supervising the financial industry.

Of how many members does the council in China consists of?

13

What are the MP tools?

Interest Rates; Reserve requirements; open-market operations; exchange rate; administrative monetary policy

What are the lending rates?

The rates at which commercial banks charge the public when lending.

What are the deposit rates?

The rates at which commercial banks pay the public in return for deposits.

What are re-lending rates?

The rates at which the PBoC charges commercial banks when lending.

What are rediscount rates?

The rate at which the PBoC charges commercial banks with discount notes.

What is the divisible by 9 rule?

Interest rates are divisible by 9 instead of 25.

What are the reasons for DB9 rule?

1. Chinese financial calendar has 360 days, instead of 365 or 366 days. 2. The number 9 in Chinese language shares a pronunciation with the word ``longevity" and monetary policy has to be sustainable.

What is the rate now?

6%

What specific is about reserve requirements?

Besides the level of reserve requirements, the PBoC sets the interest rates at which it pays commercial banks for the required reserves and the voluntary ones.

What is administrative monetary policy in China?

Most of commercials banks in China are state-owned. Therefore, PBoC is able to tell them to reduce the loans when it wants to thighten monetary policy and other way round.

What are the transmission channels?

Bank and Inter-bank Interest Rates, Inflation Expectations, Credit Supply, Asset Prices, Consumption and Investment behaviour.

What happens when interest rates are changed?

The change in interest rates affects consumption and investment behaviors by making it more expensive or cheaper to fund consumption and investment.

What happens when reserve requirements are changed?

affects the amount of money available for lending to households and companies.

What happens when PBoC changes lending and deposit rates?

it first directly affects bank interest rates because it sets those interest rates, with a very limited freedom of a floor for lending rates and a ceiling for deposit rates, It also indirectly affects inter-bank interest rates when it changes the re-lending or rediscount rates, or the reserve requirement for commercial banks.

Does change of interest rate affect asset price?

yes because of its impact on funding conditions and public expectations

What does changes in behaviour affect?

level of domestic demand for goods and services relative to domestic supply and as a result, influence price developments.

Define aspects of chinese stabilization.

Steadily Growing Demand, Steady Agricultural and Industrial Output, Positive Growth of Fiscal Revenue and Expenditure, Surplus in Balance of Payments

How chinese MP will look like in the future?

ModeratelyEasyMonetaryPolicy, To Maintain the Stability of the Local Financial System, To Create Good Monetary and Credit Environment