'Virtual' progress expected in interest ratesliberalization

Date Mar 25 2014 08:56:42

BEIJING - A vice governor of China's central bank on Saturday promised "substantial" progresswill be achieved in liberalization of deposit interest rates by next year.

The People's Bank of China (PBOC) will prioritize reform on deposit interest rates this year afterremoving floor limit for lending interest rates in financial institutions in 2013, Yi Gang said on thesidelines of the China Development Forum in Beijing.

His words echoed that of Zhou Xiaochuan, the PBOC's governor, who said China is very likely toease its grip on bank deposit rates within one or two years during the annual "Two Session" heldearlier this month.

Currently commercial banks in China offer a maximum interest rate for one-year deposits of 3.3percent, while lending rate has no cap. Therefore the reform is considered the last and mostimportant step of the country's interest rate liberalization.

Along with advancing financial reform, China will strengthen monitoring efforts, which include awithdrawal mechanism for institutions, Yi said.

Yi also noted financial regulator should build a sound environment for fair competition betweentraditional banks and Internet financial businesses in a bid to prevent risks and ensuresustainable development.


Edited by SHMET

Wide measures to maintain financial stability

Date Feb 12 2014 08:50:58

Central bank vows to deal with risks, use market mechanisms to resolve local govt debt problems 

China's central bank announced that it "will take comprehensive measures to maintain financial stability and hold the bottom line to prevent systemic and regional financial risks". 

"We will strengthen our efforts in monitoring local government debt and solvency and explore the use of market mechanisms to solve problems in local government debt," said the People's Bank of China in a quarterly monetary policy report released on Saturday. 

The large-scale financing model for construction led by local governments in recent years stabilized gross domestic product growth, but it also increased economic operational risks, according to the central bank. 

China's National Audit Office revealed the total amount of debt that local governments are responsible for repaying had reached 10.89 trillion yuan ($1.8 trillion) by the end of June. 

"Investors are concerned with whether or not defaults will happen because of the rapid expansion of shadow banking, local government financing platforms and trust products in China and whether defaults will lead to a systemic crisis. It is likely to reverse the appreciation of the yuan and cause capital outflows," said Wen Bin, supervisor of macroeconomic research at the Bank of China's Institute of International Finance

But even if such things do happen, the central bank and the State Administration of Foreign Exchange still have a number of measures to handle the problems, Wen added. For example, Chinese authorities are exploring market-based instruments such as a "Tobin tax" on financial transactions to deter speculative capital flows, said Guan Tao, the State Administration of Foreign Exchange official in charge of balance of payments, at a news conference in January. The Tobin tax is an excise on all spot conversions of one currency into another. The tax is intended to put a penalty on short-term financial movements into another currency for a quick profit. 

The central bank also noted in the report that it will "use a combination of tools including the cash reserve ratio, standing liquidity facilities and short-term liquidity operations to adjust the liquidity of the banking system". In the meantime, it will guide commercial banks to strengthen liquidity and asset-liability management. 

The central bank emphasized it will "improve systemic financial risk assessments and early warning systems". Apart from strengthening the oversight of defaults of local government financing platforms, industries with excessive capacity and the real estate industry, it will enhance the risk monitoring of cross-market financial products and push forward establishment of the deposit insurance system. 

The Chinese economy is likely to remain stable and make progress in the period ahead because there is still a large potential for economic growth and the government is promoting comprehensive reform that will unleash economic vitality. Moreover, because of the acceleration of the US economic recovery, many financial institutions have forecast global economic growth in 2014 will be faster than in the previous year. 

But it also pointed out the economy still faces many risks and challenges. 

"The current base for economic growth is still unstable. The growth is increasingly relying on investment and debt. Resources are overwhelmingly concentrated in real estate, which will easily cause rising debt levels," said the central bank report. 

The external environment is no less complicated and volatile than the internal one. 

Following the US Federal Reserve's decision to start tapering its quantitative easing policy, emerging markets will have to deal with capital outflows, increases in finance costs and harsher export competition. Therefore, China needs to continue promoting economic restructuring and make major breakthroughs in the transition of its economic growth pattern, the central bank concluded. 


Edited by SHMET

'Three guarantees' aimed at improving natl auto industry

Date Sep 23 2013 12:03:28

As the auto industry looks ahead to the implementation on Oct 1 of China's "three guarantees", the first national regulations on car warranties, the General Administration of Quality Supervision, Inspection and Quarantine responded to questions about the new rules in a written interview with China Daily reporter Han Tianyang.

What's the significance of the three-guarantee regulation?

The regulation has been drafted mainly to protect consumer rights and help establish a fair market environment as well as promote the healthy development of the auto industry.

It is also necessary to further improve China's legal system and build a harmonious society.

The strict regulation makes automakers pay more attention to the quality of their products. Customers now have a better legal basis to defend their rights.

They have various channels through which to lodge complaints. And they are entitled to better products and services.

What will be the major difficulties in the initial period of implementation?

In the initial period of implementation, there may be increasing complaints because the regulation is not well understood by some customers.

Cars are complex products made up of thousands of components and parts.

It's difficult to judge problems based on a single part or failure. Moreover, in general, the high test and inspection costs are difficult for consumers to afford.

Learning from the experiences in some developed countries, a talent pool of technological consultants will be established to offer consultation, which will be a more simple and economic way to solve possible disputes. When tests and inspections are required to verify certain problems, they should be done according to relevant regulations.

What's the difference between the three-guarantee policy and the previous regulation on auto recalls?

Their objectives are different.

The three-guarantee regulation aimed at isolated quality problems related to individual cars, which could be safety problems and general functional problems.

A recall targets cars that have quality problems related to safety - or in another word, defects - that exist in a batch of products because of design or manufacturing reasons. Moreover, the three-guarantee only applies to passenger vehicles, while recalls cover all kinds of vehicles, including passenger vehicles, commercial vehicles and trailers, even tires.

Who should be responsible for replacing or repairing a defective car and providing refunds? Dealers or carmakers?

The car sellers should bear the direct responsibility, according to the three-guarantee regulation.

However, if the fault lies with producers or other parties, the sellers - or dealers - have the right to demand compensation from them.

If the customers have disputes with the companies on vehicle quality problems, they can solve the problem through three ways - mediation, arbitration and civil suits.

Edited by SHMET

New guideline to supervise horizontal competition

Date Sep 03 2013 08:51:10

The China Securities Regulatory Commission and State-owned Assets Supervision and Administration Commission released a guideline on Friday to supervise horizontal competition between State-owned companies and their public holding firms.

Horizontal competition refers to bodies involved in the same sector or sharing the same interests.

The document aims to regulate transactions and clarify the relationship between the two, according to the commissions.

It requires State-owned companies to provide specific plans to solve the problems regarding horizontal competition and clarify business scopes and boundaries, based on different development situations.


Edited by SHMET

New rules to regulate local government spending

Date Aug 23 2013 08:22:28

BEIJING -- The Chinese Finance Ministry Wednesday ordered all government bodies at or above county level to make public their budgets and final accounts reports by 2015. 

They should also release their budgets and expenditures on the use of public funds for receptions, vehicles and overseas trips, also known as "the three public consumptions," the ministry said. 

The move comes as China vowed to cut administrative costs for governments as well as curb extravagance and corruption. 

Public institutions, social organizations and companies using fiscal funds allocated by authorities at or above county level should also unveil their spending on the three items, said the ministry. 

China's State Council has required provincial-level governments to disclose information on "the three public consumptions" by 2013.

Edited by SHMET