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China Financial Industry Report, 2007

Published: Aug/2007

Hard Copy  USD $ 1200
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The surplus of the broad money supply (M2) in China financial market amounted to RMB 34.56 trillion by the end of the 4th quarter of 2006, up 16.94% year-on-year, and the growth margin was 0.63% lower than that of the end of previous year. The surplus of the narrow money supply (M1) reached RMB 12.60 trillion, rising 17.48% year-on-year, and the growth margin was 5.7% higher than that of the end of previous year. The surplus of market currency circulation (M0) was RMB 2.71 trillion, increasing 12.65% year-on-year. In addition, the accumulative net cash invested amounted to RMB 304.1 billion all over 2006, increasing RMB 47.8 billion from a year earlier.

Although M2 declined to 16%, the objective that Central Bank of China made in the beginning of 2006, the M1 was still far higher than 14%, in addition, it exceeded M2 for the first time in the 23 months straightly since Feb 2005.

The inter-bank lending market on the weighted average interest rate was 2.25% in Dec 2006, down 0.8% over the previous month, and up 0.53% year-on-year. The monthly weighted average interest rate of pledged bond repurchase was 2.01%, 1.04% lower over the previous month and up 0.47% year-on-year. The inter-bank market profit rate operation in 2006 was higher than that of 2005.

The equity division reform was nearly completed in 2006, and the new share recovered to issue, the stock market shows the continuous increase overall, and the stock indices climbed to the highest in history.

It is forecasted that it is not possible to change the fluidity surplus fundamentally in 2007. The selective policies of Central Bank of China include raising the required deposit reserve ratio, strengthening the public market operation and currency market profit rate leading, meanwhile, Central Bank of China will focus on “Window Guide” to restrict the leading impulse of the commercial banks. Meanwhile, Central Bank of China will increase the interests again probably, while it is not possible to increase the interests in a short term.



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