The People’s Bank of China has already ordered banks twice this year to increase the proportion of deposits they must hold in reserve, rather than lend out, in order to gently slow the red-hot economy and nip inflation in the bud.
But, unlike Australia or Malaysia, the central bank has yet to increase interest rates, leaving investors anxious for clues as to how rapidly it might withdraw the extraordinary monetary stimulus it has provided since late 2008 to prop up the world’s third-largest economy.
“In order to be consistent with the relatively easy stance, the policies will be better targeted and more flexible,” the PBOC said in a statement issued ahead of a news conference on the sidelines of the annual session of parliament.
The statement broke no new ground on the issue of the exchange rate of the yuan, also known as the renminbi (RMB).
To the dismay of Washington and Brussels, China has frozen the yuan’s exchange rate at around 6.83 per dollar since mid-2008 to preserve the international competitiveness of its exporters. But the PBOC merely restated the policy set out on Friday by Premier Wen Jiabao in his annual report to parliament. “The formation mechanism of the RMB exchange rate will be further improved to keep the exchange rate basically stable at an adaptive and equilibrium level,” the statement said.
