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Foreign Exchange Rate, Interest Rate and Financial Reforms: People's Bank of China's Monetary Policies and its Socioeconomic Consequences in the Reform Era
|Keywords:||中國人民銀行 ; 金融改革 ; 固定匯率制度 ; 利率管制 |
Economics diplomacy and statecraft ; economic security ; China-Southeast Asian relations ; ASEAN ; free trade agreements ; One Belt and One Road
|Issue Date:||2021-11-17 09:03:41 (UTC+8)|
The attempt of this paper is to elucidate financial problems in transitional China through analyzing the operation of People's Bank of China (PBoC) on monetary policy instruments. Prolonged exchange rate intervention, the PBoC has accumulated massive foreign exchange reserves (assets). The PBoC also released the same amount of Renminbi money base (debt) by sterilization operations. However, the rate of return of PBoC's foreign assets is very low, and it is unable to pay a higher interest rate for its debt. Under the circumstance, the PBoC continuously raises the ratio of reserve requirement so as to lock the money base and to maintain the balance of its balance sheet. Thus, the PBoC's major debt is the reserve deposited by the state-owned commercial banks. The Increase of the reserve ratio has enhanced the cost of capital of the state-owned commercial banks. As for a subsidy, the PBC lower the deposit interest rate and maintain a large gap between deposit interest rate and loan rate of the state-owned commercial bank. The ultimate aim of the PBC is to make up for low yields of its foreign exchange reserve. Policy regulations, foreign exchange rate intervention and interest rate control, give rise to profound socio-economic impacts on the China's economic development.
|Relation:||東亞研究, 50(1), 1-28|
|Appears in Collections:||[東亞研究] 期刊論文|
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