Chinese Central Bank is reforming its monetary policy to fight inflation

The People's Bank of China has separate, higher reserve requirements for small commercial banks and intends to continue to shift from targeting monetary aggregate M2 to more active use of monetary aggregates M3 and M4, the newspaper reported, "Zhongguo Chzhentsyuan Pao", citing its own sources in the industry. The People's Bank of China set a separate, higher reserve requirements on deposits in national currency for the part of small commercial banks to limit credit growth and ensure the financial stability of small banks, reported the publication. Basically, we are talking about banks operating at the local level, particularly in large cities. According to the newspaper, the measure is associated with rising inflationary pressure: the Central Bank forecast in January and February, inflation may exceed 5%. Publication of official inflation data for January is scheduled for next week. In addition to the introduction of special high reserve requirements for smaller banks, the Chinese Central Bank demanded that the commercial banks to limit the amount of loans issued in January 12% of the planned target set for 2011. As a result, according to the publication, many banks in the last ten days of January have stopped lending. Nevertheless, in January have been issued new loans to 1.2 trillion yuan (182.4 billion U.S. dollars). In 2009, Chinese banks had issued a record volume of loans - 9.59 trillion yuan in 2010 the Government had planned lending volume in 7.5 trillion yuan, but it was exceeded, was eventually granted loans to 7.95 trillion yuan. Official Target credit for 2011 has not been published, according to expert estimates, it can make 6,7-7,5 trillion yuan. In the future the Chinese Central Bank, according to the publication intends to be guided in its policy on enhanced rates of money supply - M3 and M4. Currently, the People's Bank of China in its planning for a start primarily on the M2. In this case, M2 includes cash and balances in national currency in the bank accounts of residents, while M3 and M4 also include securities traded in the money market, especially large time deposits and deposits in foreign currency . According to the newspaper, changing approaches to the assessment of the money supply can affect the process of making the People's Bank of China decision to change rates and reserve requirements for commercial banks. Source: bankir.ru