China prepares for financial reforms at upcoming work conference
(Xinhua)Updated: 2007-01-16 13:41 Speculation over possible financial reforms in China is building as the opening of a high-profile financial work conference, which is held every five years and usually heralds significant policy changes, draws closer.
The third national financial work conference, scheduled for later this month in Beijing, comes at a time when China faces a host of new problems: a record high trade surplus of 177.47 billion U.S. dollars in 2006, a huge foreign exchange reserve that exceeds one trillion U.S. dollars, stagnant domestic consumption and the possibility of a slowdown of the world economy.
These problems have formed a labyrinth rife with tricks and traps. A surging trade surplus will force the central bank to buy back foreign currencies with the yuan, which will increase the foreign exchange supply. To absorb liquidity, the central bank will have to raise central interest rates to raise the cost of loans. However, this will encourage saving, thus further dampening consumption.
Citing anonymous sources close to the organizers of the meeting, China Business News said that the central bank, the Ministry of Finance, the Banking Regulatory Commission, the Securities Regulatory Commission, the National Development and Reform Commission and the State Administration of Foreign Exchange had each prepared separate reports based on field research.
The reports will cover financial supervision, rural financial reform, foreign
exchange management, state-owned financial assets control, the development of
the capital market, opening-up of financing sector, reform of state-owned banks,
corporate governance and the development of the insurance industry, according to
the newspaper.
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