Print

Mail

wiki links

PRC commission publicly criticizes central bank

China's key economic planning body, the National Development and Reform Commission (NDRC), yesterday lashed out at the reform policies of the central bank in a highly unusual display of bureaucratic infighting.

The NDRC, arguably the most important body with responsibility for the economy within the government, sharply criticized the People's Bank of China for overstepping its mandate on two major banking and securities reform programs.

"The monetary operations of the central bank should avoid fiscal bailouts and stop grabbing more power from the Ministry of Finance to form another fiscal distribution channel because it is distorting," the NDRC said on its Web site.

The central bank has spent US$60 billion in foreign exchange since the end of 2003, shoring up the capital bases of three of the four state-owned commercial banks.

Ratings agencies such as Standard and Poor's have said such moves raise corporate governance issues.

The central bank has recently begun rescuing the embattled brokerage industry through soft loans.

Although the Beijing government is rife with factional infighting, disagreements are rarely aired and then only through the published opinions of the research bodies under the various ministries.

The NDRC also said that interest rates should be raised from current levels and that the government should counteract any corresponding increase in capital controls with tougher oversight and through the buying and selling of foreign exchange.

The central bank increased benchmark deposit and lending rates by 27 basis points apiece at the end of October last year, and has signaled that it will not raise interest rates anytime soon.

Separately, the NDRC statement said that China needs to avoid a rise in the yuan of more than 2 percent, arguing that any greater appreciation would make the exchange rate too volatile.

"If we control the yuan flotation exchange rate to within 2 percent both up and down, it will avoid big volatility and, in the meantime, relieve the pressure on the yuan to appreciate," the NDRC said.
This story has been viewed 1388 times.