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HIGHLIGHTS-China c.bank news conference: yuan volatility acceptable
March 12, 2015 / 7:02 AM / 3 years ago

HIGHLIGHTS-China c.bank news conference: yuan volatility acceptable

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BEIJING, March 12 (Reuters) - China has no need to change its prudent monetary policy, and is moving to introduce deposit insurance and remove ceilings on deposit rates in 2015, central bank governor Zhou Xiaochuan told reporters on Thursday.

The news conference during the annual parliamentary session in Beijing also featured comments from vice governor Yi Gang, who also heads the country’s foreign exchange regulation unit under the central bank, and from Jin Qi, the head of the board at China’s Silk Road infrastructure investment fund.

Following are highlights:

GOVERNOR ZHOU XIAOCHUAN‘S COMMENTS:

- China will launch a deposit insurance system in the first half of 2015

- China may remove ceiling on deposit rates this year

- China has no need to change its prudent monetary stance

- Money supply growth is appropriate, policy adjustments have kept liquidity levels at appropriate level

- Yuan volatility is normal in an open economy, choppy global environment added to yuan volatility

- Not too worried about eventual U.S. rate rise, is good signal for global economy

- Not seeing signs of large-scale hot money outflows, capital flight from China small compared to normal outflows resulting from real trade deals

VICE-GOVERNOR YI GANG‘S COMMENTS:

- China is closely watching changes in consumer and producer price inflation

- Prudent monetary policy will combat falling prices

- Will remain vigilant about cross-border forex flows

- It’s reasonable for firms to want to hold more U.S. dollars

- Sees no need to change Hong Kong’s dollar foreign exchange mechanism

- Hopes IMF will take yuan’s increasing convertibility into account when reassessing Special Drawing Rights (SDR) inclusion

- No doubt the yuan will increase the SDR’s relevance

ZHOU‘S QUOTES:

“The new normal condition is not special. There are problems, so this does not necessarily require a new monetary policy formula.”

“The use of various tools to adjust (money supply), added after a modest growth rate of M2, doesn’t change the conditions of a prudent monetary policy.”

“A Fed policy change could bring some opportunities for speculation but it will not pose a big threat, so we are not worried about it.”

“China has some financial instruments used purely for speculation so we need to strengthen regulation of speculative tools.”

“The likelihood of liberalising interest rates, everybody’s long-awaited last step, is extremely high this year.”

“Inefficient use of capital is a situation the needs to be addressed.”

“Small and medium-sized enteprises and start-up microenterprises are at the grass roots, but grass root financial services are not good enough.”

“We have confidence in Hong Kong as a financial centre and their ability to manage risk.”

YI‘S QUOTES:

“This year domestic U.S. dollar deposit growth is in the hands of ordinary people, a good thing. Right now, for businesses, individuals and financial institutions to hope to hold more dollars is normal, but we will watch for signs of abnormalities.”

“Being included in SDRs would give China’s financial reform a great boost. But when it is included, whether it should be included or not (is irrelevant); China’s financial reforms process will advance regardless.”

“This year we will definitely launch the Shenzhen-Hong Kong stock connect programme.”

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Feb consumer inflation rebounds but producer deflation intensifies (Reporting by Kevin Yao and Koh Guiqing; Additional reporting by the Shanghai newsroom; Writing by Pete Sweeney; Editing by Kim Coghill)

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