Responses by Scott Tomiko 12-3-13
Explore
the website of a central bank.
•
What are the main policy
goals and instruments used by the central bank?
China has implemented “a proactive fiscal policy
and a prudent monetary policy”. They
have tried to strengthen reform measures to help transform the stable growth
pattern prior to 2012 to a more productive, accelerated pattern in 2013. Macroeconomics
problems remain unsolved in 2013; this has forced the PBC to continue to reform
their market-based interest rate and their RMB exchange rate.
•
What is
its current monetary policy position?
China will stick with its prudent momentary policy
thru the end of this year despite a slow down in the GDP in the second quarter
from 7.7% to 7.5%. China is trying to strike a balance between current reforms
and maintaining its economic growth. The central bank has been ready to
liberalize its deposit rate. This will mean that these rates are subject to a
10% cap. China has injected $11 billion yuan into the banking system this week
and their 2013 totals are at $197.8 billion yuan. They injected $1.438 trillion
yuan in 2012. In 2012 they reduced each banks reserve ratio, which put another
$800 billion yuan into circulation. China has raised the discount rate on the
cash it provides to the market. It has set a rate of 4.1% for its seven-day
bond reserve repurchase agreement. This
has increase from 3.9%.
•
How effective do you think
the policy has been in promoting the country’s goals?
Chinas discount rate increase will have a negative
affect on business activity, inflation will decline slightly (a positive) and
their currency will strengthen (another positive). Easing deposit rates have
allowed China to accelerate its economy.
Injecting more money into the economy does provide businesses with money
to expand by citizens having more money to spend.
•
End your post with a
question for your classmates related to how the central bank you have examined
compares to other central banks. Based on
China’s current policies of increasing economic growth, they are injecting
billions of yuan into their economy.
This is similar to the Federal Reserve of the United Sates with its
current Bond buying program of $85 billion a month. China’s GDP declined from
the second to the third quarter, one more decline and they will be in a
recession based on their current stimulus package. Even in China when there is
talk of tighten up money supply a panic arises. How will either banking
system stop this stimulus policy without have their perspective economies slow
drastically or revert back into a recession?
Be sure to list the URL of the central bank.
http://www.pbc.gov.cn/image_public/UserFiles/english/upload/File/中国金融稳定报告2013（英文版）.pdf
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