Yuan has grown more flexible

(Xinhua)
2007-10-17 14:51

China’s currency has grown more flexible with its central parity rate having gained 10.19 percent accumulatively against the US dollar as of September 30, according to statistics released at the 17th National Congress of the Communist Party of China yesterday.

China scrapped its decade-long peg to the greenback in July 2005 and linked it to a basket of currencies. The yuan is now allowed to rise or fall 0.5 percent a day against the US dollar.The central parity rate yesterday was 7.5136 yuan against one US dollar, up slightly from Monday.

China insists the revaluation of the yuan must be gradual to maintain the country’s stability economically.

In a keynote speech to the Party congress on Monday, President Hu Jintao said China would improve the yuan exchange rate system and gradually make the yuan convertible under the capital account.

 

Central bank: China to further rein in credit growth

(Source: Xinhua)

BEIJING, Sept. 29 – The policy makers of China’s central bank said at their third quarterly meeting that the country should carry out “moderately tightening” monetary policies to further rein in credit growth. They said the central bank should coordinate the adjustments of interest rates and exchange rates and step up controls over the liquidity within the nation’s banking system to maintain “rational” growth of lending. The policy makers suggested a close watch on the potential impact of the U.S. subprime crisis to the Chinese financial market despite the nation’s economy being “generally stable”. Increasing inflationary risks and rising assets prices have added to the problems of excess investment growth and widening trade surplus, they said. The central bank should carry out studies on the problems to find a solution and “improve the quality of China’s economic growth”, said the policy makers. China’s commercial banks are entering a high risk period for increasing housing mortgage loans, according to a report released by the China Construction Bank (CCB), the country’s second largest commercial lender. The banks could face a rapid rise in mortgage delinquency rates because of the frequent lending rate hikes and cheating in housing mortgage loans, the report stated. China has raised the benchmark one-year lending rate five times this year amid efforts to curb investment growth and cool the overheated economy. Meanwhile, some mortgage recipients had cheated on their applications and invested their funds in the stock markets, which had more than doubled in value since the beginning of the year. Analysts believe a drop in the markets could result in more bad loans. China’s central bank vice governor Wu Xiaoling warned commercial banks not to sacrifice credit control for high profits earlier this month Statistics show new loans totaling 3.08 trillion yuan (409.6 billion U.S. dollars) were approved in the first eight months this year, and the figure is close to the total loans of 3.18 trillion yuan (422.9 billion U.S. dollars) for 2006.

 

Central bank may raise mortgage rate

(Source: China Daily)

Sept. 26 – The central bank is expected to increase the interest rate of mortgage loans to 1.1 times the benchmark one-year lending rate this week, sources said. The move is an attempt to curb the rise in house prices and speculation in the property market. The current five-year lending rate has reached 7.83 percent after the central bank raised the interest rate for the fifth time this year on September 13. This means the interest rate for five-year mortgage loans could reach as high as 8.613 percent if the central bank makes a move this week. “With the expansion of mortgage loans, and as the central bank continuously raises interest rates, mortgage loans are beginning to face a high risk of default,” China Construction Bank (CCB), the lender with the highest mortgage loans in China, said in its latest report. Total non-performing mortgage loans in three major commercial banks – CCB, the Industrial and Commercial Bank of China, and Bank of China – rose to 19.2 billion yuan at the end of 2006 from 18.4 billion yuan in 2005, according to CCB. The central bank is likely to stipulate commercial banks to raise mortgage deposits to at least 40 percent for homebuyers who intend to buy a second apartment, according to the source. “Homebuyers will have to make a down payment of 40 percent to buy a second apartment, and for apartments for commercial use, the down payment will be raised to as high as 50 percent,” he said. The minimum deposit for an apartment of more than 90 sq m is currently 30 percent while for apartments less than 90 sq m it’s 20 percent. The central bank will also require commercial banks to stop lending to property developers who hoard land and house for speculation purposes, according to the source. Property prices in 70 major cities jumped 8.2 percent in August from a year earlier after gaining 7.5 percent in July, according to figures from the National Development and Reform Commission. Housing prices in Beijing rose 12.1 percent from a year earlier, while prices in Shenzhen went up 20.8 percent.

 

China’s inflation to surpass 3% for full year

This year’s consumer inflation is likely to exceed the central bank’s target of 3 percent, a top official said yesterday.

“Given the relatively high inflation in the first seven months of the year, even if we step up control measures now, the consumer price rise will still probably be above 3 percent for the whole year,” Su Ning, vice-governor of the People’s Bank of China (PBOC), told a news conference in Beijing yesterday.

“The central bank is paying close attention to changes in prices and will take further macroeconomic control measures to keep prices stable,” Su said.

Spurred by surging food prices, the consumer price index, a key gauge of inflation, hit a 10-year high of 5.6 percent in July, up from 4.4 percent in June. The average inflation in the first seven months rose 3.5 percent year on year.

Food prices, which make up about a third of the inflation basket, rose 15.4 percent year on year last month. Prices in the first seven months rose 8.6 percent from the same period last year.

In a report to the Standing Committee of the National People’s Congress, Ma Kai, minister of the National Development and Reform Commission (NDRC), said the government will take a slew of measures such as encouraging pig raising and increasing grain and vegetable supplies, to curb inflation.

“The government will also strengthen monitoring of prices and step up efforts to crack down on price cartels and illegal price rises,” the minister said.

In an effort to curb inflation, the central bank last week raised interest rates for the fourth time this year. The benchmark one-year deposit rate is now 3.6 percent while the one-year lending rate is 7.02 percent.

“I expect the central bank to raise interest rates for the fifth time at the end of October,” Li Zhikun, senior analyst at China Investment Securities Co Ltd, told China Daily.

Li estimated inflation in August to be above 6 percent due to the continuing rise of food prices, and forecast that inflation for the full year will likely to be around 4.2 percent.

Jun Ma, China economist at Deutsche Bank in Hong Kong, also estimated August inflation at round 6 percent; and believes the likely timing of the next rate hike will be in the second half of September.

 

Household deposits in China drop

June 13 – Chinese people who used to stash away their money into banks for value preservation are rapidly taking their money out, as the country’s household deposits have declined for two consecutive months.

Household deposits dropped by 278.4 billion yuan in May, 67 percent more than the decline of 167.4 billion yuan in April and down 295.9 billion yuan from the same period of last year, according to figures released Tuesday by the People’s Bank of China, the central bank.

 The balance of M1, a narrow measure of money supply that includes cash and demand deposits, surged by 19.28 percent to 13.03 trillion yuan by the end of May.

The growth rate faster than the end of last year but slower than the end of April plus diminishing household deposits indicates Chinese households are keeping money on tap for investment in the capital market.

In an attempt to squeeze the speculative bubbles on the securities markets, the Ministry of Fiance raised the stamp tax on securities trading from the current 0.1 percent to 0.3 percent on the last work day of May.

The central bank said in a statement that the money supply has expanded slowly, with the balance of M2, a broad measure of money supply growing at a slower 16.74 percent to stand around 36.97 trillion yuan by the end of May.

The growth rate is 0.20 percentage points lower from the end of last year and 0.39 percentage points lower from the end of April.

 

China might raise interest rates

Chinanews, Guangzhou, June 12 – Li Junjie, an economist at the State Development and Reform Commission’s Macroeconomy Research Institute, recently wrote an article in the Information Times. The article says that due to liquidity problem, capital market expanded quickly, and in order to curb the fast rise of assets prices, the central government should raise the interest rates.

In fact, many institutions predict that the central bank may raise the interest rates shortly. If the interest rates are raised, it may curb the rising of the stock index. However, the measure may bring more negative consequences to the real estate market, some experts say. On June 5, Chinese central bank governor Zhou Xiaochuan said that the central bank had paid close attention to the CPI figures in May, which would be released soon.

Based on the figures, the central bank will decide whether or not to raise the interest rates, he said. Many insiders said that it was very likely for the central bank to raise the interest rates. Chief economist of Credit Suisse First Boston Tao Dong even gave very specific information on such raise. According to Tao, the central bank should raise the interest rate for loans three times in the second half of this year and the rate should be raised by a total of 81 base points, making the one-year loan rate reach 7.38 percent. In addition, the one-year deposit rate should also be raised to reach 4.14 percent by this end of the year so that the actual interest (interest after the interest gains tax is deducted) will remain positive.

Judging from the current status, it is very probable for the May CPI figures to rise more than expected. In light of this, it is almost certain that the central bank will raise the interest rates for the sixth time in recent years, said Han Shitong, a real estate analyst in Guangzhou. The central government wants to curb the rise of assets prices by possible raise in interest rates. The idea may not be wrong. However, it should be noted that if the interest rates are raised, it may lead to negative consequences to the real estate market, some experts said.

 

Central bank raises interest rates, reserve requirements

 

 Governor of People’s Bank of China Zhou Xiaochuan
 attends the closing session of the Board of Governors
of the African Development Bank Group held in Shanghai
May 17, 2007.
The central bank announced Friday to raise the deposit
and lending rates from May 19. [Reuters]

China will raise the one-year deposit and loan interest rates by 0.27 and 0.18 percentage points, respectively, to 3.06 and 6.57 percent as of May 19, the central bank of China announced on Friday.

The People’s Bank of China will also raise banks’ reserve requirement ratio by 0.5 percentage points to 11.5 percent,effective on June 5.

China will continue to use monetary instruments to maintain macro-economic stability, the governor of the central bank said at a press conference on Thursday. Zhou Xiaochuan said China may also consider other instruments to maintain macro-economic stability in the country.

Zhou noted that China’s macro-economic stability is very important both for the nation and for its impact on the world economy.

The People’s Bank of China has raised interest rates four times since April 27, 2006. In March 2007, China’s central bank raised the interest rate by 0.27 percent.

It has raised the bank reserve ratio eight times over the past year, each time by 0.5 percentage point. It stood at 7.5 percent of deposits before the first increase last June. The last increase was on April 16.

But the tightening policies have largely failed to prevent the economy from becoming overheated. The gross domestic product grew 11.1 percent in the first quarter of the year, compared to last year at 10.7 percent, statistics showed.

Total value of the Chinese stocks hit 17.43 trillion yuan (US$2.27 trillion) yesterday and has likely surpassed the total in household deposits, as money continues to flow out of banks and into the stock market.

In April, total household renminbi deposits dropped to 17.37 trillion, a decrease of 167.4 billion yuan (US$21.7 billion) compared with March. Household deposits may drop further in May as investors are rushing to withdraw money from savings accounts and pump them into the stock market, the Shanghai Securities News reported.

 

RMB Deposit

Savings Deposit

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Savings deposit is a method of deposit that sets no limit on length of maturity, time and amount of deposit and withdrawal . It is the most basic and conventional method of deposit of a bank. A client may deposit and withdraw such deposit at any time. For its free and flexible use of funds, such deposit is taken as the basis of a client’s financial asset management.

Characteristics:

1.   The minimum amount of a savings deposit is set at RMB1. At the time of opening a new account, the client shall fill in a deposit slip, while at the time of depositing and withdrawing ,the customer may choose the slip-free service.For a client to open a new account, the bank will issue to it a passbook against which the client may handle deposit or withdrawal at any time . In order to ensure the safety of money, the client may opt for the method of withdrawal by password.

2.   Convenience and flexibility. The client may make the withdrawal or transfer in line with the need for money, not subject to time limit. It may also transfer funds swiftly through telephone banking or ATM service.

3.   Having the function of principal account. A savings deposit account may serve as a principal account of a client. It may be connected through the computer network with such accounts as credit card account, telephone banking account, Great Wall electronic debit card account, checking account and time and current account passbooks so that fund flows between the current and time accounts and other accounts are realized.

4.   Interest on a savings deposit is computed once on June 30 of every year at the interest rate for current deposits quoted for the date of interest settlement. If the account is closed prior to the date of interest settlement, the interest is computed up to the day prior to the account closing date at the interest rate for current deposits quoted for the closing date. In case of interest rate adjustment within the maturity, the interest amounts are computed without sub-division.

Functions:

Aside from the functions of deposit and withdrawal, a savings deposit account also has the following functions:

1.   Applying for supportive Great Wall electronic debit card with which to handle such banking services as withdrawal and transfer on an ATM, and consumption at designated shops;

2.   Handling salary payment service on agency;

3.   Applying for telephone banking service;

4.   Automatic banking. A client with a savings deposit account at any operational unit of the branches and sub-branches of the Bank of China may handle deposit and withdrawal at all local operating units of the Bank of China connected with the computer network by presenting the passbook.

Procedures for Account Opening

1.   A passbook may be got and a debit card may be applied for at the same time at any branch of the Bank of China if a deposit slip is filled in and a certain amount of cash (RMB 1 yuan at least) is deposited.

2.   At the time of account opening, the client may choose the method of withdrawal by password or by the passbook. If the method of withdrawal password is chosen, the client shall put on the spot a six-digit password into the said savings account. The password is put in through the password device on the counter and is unknown to any other person including the clerk of the bank. The password is the key with which to withdraw and must be kept in mind firmly and not leaked to others.

Please be very careful: Put the passbook and the password at the two separated places so as to avoid false claim by others in case the passbook is lost.

Time Deposit

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Time deposit is a kind of deposit with a definite length of maturity, deposited and, withdrawn together with the interest in a lump sum or by installment. The longer the length of maturity of a time deposit, the higher its interest rate. Time deposits operated by our bank mainly include the following types:

Time Deposit of Lump-sum Deposit and Withdrawal

•     The minimum amount for this type of time deposit is set at RMB50, without any upper limit. The maturities range from six grades: three months, half a year, one year, two years, three years and five years. At the time of account opening, the client shall fill in a deposit slip, and the savings outlet will give it a certificate of deposit against which the principal and interest may be withdrawn when due. Withdrawal in advance and collection from other places are permitted. Such deposit has the characteristics of long maturity and high interest rate, suitable for depositing of savings that will not be used within a quite long period of time. Partial or full amount withdrawal in advance is permitted. For withdrawal in advance, the interest is computed at the current deposit rate quoted for the day of withdrawal.

Time Deposit of Small Savings for Lump-sum Withdrawal

•     The minimum amount for this type time deposit is set at RMB5. The length of maturity and a fixed amount of deposit are agreed at the time of account opening, and money is deposited by month. If there is any omission of deposit within the agreed period, it shall be made up in the following month. Failure to make up the amount agreed is deemed default and for the portion deposited after default, the interest is computed at the rate for savings deposit at the time of withdrawal.

The maturities for this type time deposit range from three grades: one year, three years and five years.

Such deposit is deposited monthly, and suitable for depositors with fixed income.

Principal-receiving and Interest Withdrawing Time Deposit

•   Principal-receiving and interest withdrawing time deposit refers to savings deposit whose principal is deposited by lump sum, whose interest is withdrawn by installment and whose principal is repaid when due. The minimum amount for such a deposit is RMB5,000, and maturities range from three grades: one year, three years and five years. The client cashes interest at the bank at the agreed time by presenting the certificate of deposit. If the client wants to withdraw the principal in advance, the bank will default back the excessive interest already paid.

Time or Savings Optional Deposit

•     Time or savings optional deposit is a kind of deposit with indefinite length of maturity and whose interest rate varies in line with the length of maturity. The minimum amount of such a deposit is set at RMB50, the length of maturity is not set at the time of deposit, and the savings outlet issues a certificate of deposit against which the client withdraws the deposit. If the actual length of maturity is less than three months, the interest is computed at the interest rate for savings deposit; if the actual length of maturity is three months or more but less than half a year, the interest for the whole length of maturity is computed at a rate equal to 60% of that for three-month time deposit of lump-sum deposit and withdrawal at the date of withdrawal; if the actual length of maturity is half a year or more but less than one year, the interest for the whole length of maturity is computed at a rate equal to 60% of that for six-month time deposit of lump-sum deposit and withdrawal at the date of withdrawal; if the length of maturity is one year or more , regardless of the actual length, the interest for the whole length of maturity is computed at a rate equal to 60% of that for one-year time deposit of lump-sum deposit and withdrawal at the date of withdrawal.

Such deposit boasts the flexibility of withdrawal at any time as a savings deposit, and also enjoys a preferential interest rate approaching that for time deposit.