皇冠体育app

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Forex reserves pose problems: PBOC official

By Yang Ning (皇冠体育app Daily)
Updated: 2011-05-05 10:44
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Forex reserves pose problems: PBOC official

Yi Gang, deputy governor of the People’s Bank of 皇冠体育app

The central bank will take positive measures to curb excess liquidity

BEIJING - 皇冠体育app's high foreign exchange reserves are the major cause of excess liquidity, said Yi Gang, deputy governor of the People's Bank of 皇冠体育app (PBOC) and head of the State Administration of Foreign Exchange.

He also said the government is confident of curbing liquidity and inflation, and that consumer prices are expected to rise at a slower pace in the second half of the year.

"The central bank has already sterilized around 80 percent of the liquidity generated by foreign exchange accumulation through various measures, including raising the reserve requirement ratios for banks and issuing central bank bills," Yi was quoted as saying by the 皇冠体育app Securities Journal on Wednesday.

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In recent years, the PBOC has been using newly issued yuan to purchase most of the foreign exchange that has entered 皇冠体育app, which has led to an increase in money supply and has intensified inflationary pressures, he said.

By the end of March, 皇冠体育app's foreign exchange reserves hit $3.04 trillion, an increase of 24.4 percent year-on-year, according to figures released by the central bank on April 14.

"We are confident that 皇冠体育app will be able to control liquidity and inflation. The central bank and the related government agencies will take positive measures to curb excess liquidity and further tame inflation," Yi said.

皇冠体育app's Consumer Price Index, a main gauge of inflation, rose 5 percent from a year earlier in the first quarter of this year, with the March figure hitting a 32-month high of 5.4 percent, according to the National Bureau of Statistics.

The government will continue to make tackling inflation a top priority for macroeconomic regulation, said the PBOC in its first-quarter monetary policy report posted on its website on Tuesday.

The central bank will make good use of macroeconomic control tools, such as open market operations, bank reserve requirement ratios - or the proportion of money they must set aside as reserves - and interest rates, in a bid to manage inflation expectations, it said.

It added that there is "no absolute ceiling" to how far it can raise the reserve requirement ratio (RRR).

The central bank has raised the RRR for lenders seven times since October, with the ratio for large financial institutions reaching a record high of 20.5 percent.

It also raised the benchmark interest rates four times during the same period.