BEIJING, June 27 (Xinhua)
-- The cautious attitude of China's
central bank toward injecting cash
into the interbank market amid the
current liquidity crunch will support
the country's economic restructuring
and benefit the world
economy.
China's short-term
interbank rates rocketed to unusually
high levels during the past two
weeks, but the People's Bank of
China (PBOC) took a tough line
with the banks faced with the
cash crunch until Tuesday, when it
boosted liquidity support for some
cautious financial institutions.
A
confluence of factors has led to
the current interbank liquidity shortage,
including fast credit growth, the
concentrated collection of business income
taxes, surging cash demand during the
Dragon Boat Festival holiday, changes
in the foreign exchange market and
banks setting aside money to meet
reserve requirements.
The Financial
Times newspaper said in a report
the PBOC's new strategy signalled
the country hoped to force lenders
to stop channelling money into the
informal banking sector, known as
"shadow banking," which has boomed in
recent years and fueled concerns about
financial risks.
Moreover, it
indicated China planned to boost
medium- and long-term sustainable economic
growth at the expense of short-term
growth, the Britain-based newspaper
said.
On June 19, China
unveiled a set of measures designed
to increase the financial sector's
support for the country's economic
restructuring, including optimizing resource
allocation, absorbing private capital, and
supporting the upgrading of the real
economy.
These measures will
cause volatility in the market in
the short term, but will eventually
bring huge benefits to both the
country and the global
economy.
Firstly, China, as the
world's second biggest economy, has
played a significant role in the
international economic and financial
system.
Beijing continues to
adopt a prudent monetary policy, avoid
monetary expansion, and effectively manage
domestic inflation, which will help
curb the prices of global raw
materials and major commodities, and
help ease negative effects brought by
the U.S. quantitative easing
policy.
Moreover, the Chinese
government has proposed to upgrade the
use of China's foreign exchange
reserves and supported more Chinese
companies to invest abroad.
A
huge amount of Chinese capital in
the overseas market will help create
more job opportunities and boost the
economic development in foreign
countries.
Furthermore, more financial
resources have been invested in the
advanced manufacturing and new strategic
industries, and in the upgrading of
traditional industries. It contributes to
a new round of international labor
division and the adjustment of global
industrial distribution.
Meanwhile,
Beijing is supporting a growing
domestic consumption, such as the
consumption of major durable consumer
goods, education and tourism, and
speeding up low-rent housing
construction.
These measures will
obviously fuel a consumption boom and
expand domestic demand, and thus will
drive the growth of exports of
foreign goods to the Chinese
market.
What's more, China
has generated a vast amount of
valuable experience in changing its
financial system to an open and
market-oriented one, which will offer
some references for other
countries.
Reform is painful,
but it also paves the way for
future gains. China's economic
restructuring will unavoidably cause
short-term instability and volatility in
the market. But it's worthwhile
to do so if it is the
price that has to pay to avert
a possible bigger crisis and to
reshape China's economy toward a
more sustainable model.
