2015/7/8 Example of PBoc Cutting RRR and Example of PBoc Cutting RRR and Interest Rate Interest Rate Interest rates for one-year lending businesses by 50 basis points(bps) are cut by 25 bps to 4.85 percent and 2 percent The RRR for finance companies, or non-bank nancial institutions, will be lowered by 300 bps ending of other terms and kinds will also be the pBoc announced owered by the same margin, the announcement rpose of the rrr reduction is to boost ial institutes'abilities to support farmers It is the third rrr reduction in nearly five months nd agricultural development as well as small nd the fourth round of interest cuts in nearly icro businesses. the pBoc said. China s economic growth fell in the first quarter to 7 percent, its lowest level in six years. PBoC's Balance sheet Governor of Pboc .nillion Yan200200330042005200520072003820092010201201220132014 1985: Ph. D from Tsinghu 黑是是是是 1991-1995: Deputy director of 100106094078055079084720951021.67131 a7万1312424114141m40游a 1996-1998: Deputy Administrator a760991016311407108007807506811007811 1998-2000: Director of ccB 18734103512841689206922733591208243到1339 2000-2002: Chair of Csrc asa71a2171702124272082 001-present: Governor of PBoc Chair of China Monetary Policy Governor and Professor, Committee Net Financial As POcS POcS Monetary Policy Committee Monetary Policy Committee lished in 1997, the MPC is The Monetary Policy Committee performs its functions through its regular quarterly g since djustment of monetary policy and policy targets, An ad hoc meeting may be held if it is proposed by plication of monetary policy instrument, major d by more than one-third of he members of the Monetary policy Committee. The opinions expressed in the meeting of the policies The committee plays advisory role on the basis of Monetary Policy Committee will be recorded in the omprehensive research on macroeconomic situations and the macro targets set by the 82015/7/8 8 Example of PBoC’ Cutting RRR and Interest Rate – The central bank cut the RRR for commercial banks serving rural areas, agriculture and small businesses by 50 basis points (bps). – The RRR for finance companies, or non-bank financial institutions, will be lowered by 300 bps, the PBOC announced. – The purpose of the RRR reduction is to boost financial institutes' abilities to support farmers, rural and agricultural development as well as small and micro businesses, the PBOC said. 1-43 Example of PBoC’ Cutting RRR and Interest Rate – Benchmark interest rates have also been cut. Interest rates for one-year lending and deposits are cut by 25 bps to 4.85 percent and 2 percent respectively. – Lending of other terms and kinds will also be lowered by the same margin, the announcement said. – It is the third RRR reduction in nearly five months, and the fourth round of interest cuts in nearly seven months. – China's economic growth fell in the first quarter to 7 percent, its lowest level in six years. 1-44 PBoC’s Balance Sheet in trillion Yuan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Total Assets 5.11 6.20 7.87 10.37 12.86 16.91 20.71 22.75 25.93 28.10 29.45 31.73 33.93 Foreign Assets 2.32 3.11 4.70 6.33 8.58 12.48 16.25 18.53 21.54 23.79 24.14 27.22 28.00 Treasury Bonds 0.29 0.29 0.30 0.29 0.29 1.63 1.62 1.57 1.54 1.54 1.53 1.53 1.53 Credit to Commercial Banks 1.00 1.06 0.94 0.78 0.65 0.79 0.84 0.72 0.95 1.02 1.67 1.31 2.41 Credit to Other Financial Institutions 0.74 0.75 0.90 1.33 2.20 1.30 1.19 1.16 1.14 1.07 1.00 0.89 0.87 others 0.76 0.99 1.03 1.63 1.14 0.71 0.80 0.78 0.76 0.68 1.10 0.78 1.12 Liabilities 5.09 6.18 7.84 10.35 12.84 16.89 20.69 22.73 25.91 28.08 29.43 31.71 33.91 Monetary Base 4.51 5.28 5.89 6.43 7.78 10.15 12.92 14.40 18.53 22.46 25.23 27.10 28.11 Central Bank Bills 0.15 0.30 1.11 2.03 2.97 3.45 4.58 4.21 4.05 2.33 1.39 0.78 0.65 Central Government Deposit 0.31 0.50 0.58 0.75 1.02 1.71 1.70 2.12 2.43 2.27 2.08 2.86 4.45 Foreign Liabilities 0.04 0.05 0.06 0.06 0.09 0.09 0.07 0.08 0.07 0.27 0.15 0.28 0.16 Others 0.08 0.05 0.21 1.06 0.97 1.48 1.42 1.93 0.82 0.75 0.58 0.69 0.54 Net Financial Assets 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 45 *: by the end of Oct in 2014 Governor of PBoC • 1985: Ph.D from Tsinghua Univ. • 1991-1995: Deputy director of Bank of China • 1996-1998: Deputy Administrator of SAFE • 1998-2000: Director of CCB • 2000-2002: Chair of CSRC • 2001-present: Governor of PBoC, Chair of China Monetary Policy Committee 1-46 Governor and Professor, Zhou Xiaochuan PBoC’s Monetary Policy Committee • Established in 1997, the MPC is a consultative body for monetary policy making by the PBoC • Its responsibility is to advise on the formulation and adjustment of monetary policy and policy targets, application of monetary policy instrument, major monetary policy measures and the coordination between monetary policy and other macroeconomic policies. • The committee plays advisory role on the basis of comprehensive research on macroeconomic situations and the macro targets set by the government. 1-47 PBoC’s Monetary Policy Committee • The Monetary Policy Committee performs its functions through its regular quarterly meeting since 1997. • An ad hoc meeting may be held if it is proposed by the Chairman or endorsed by more than one-third of the members of the Monetary Policy Committee. • The opinions expressed in the meeting of the Monetary Policy Committee will be recorded in the form of "meeting minutes". 1-48