There might be some speculative funds betting on the yuan
appreciation, or the so-called "hot money" flowing into China, but
the amount was "not big", central bank governor Zhou
Xiaochuan said in Beijing Monday.
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The reason is that China now still implements foreign exchange
controls to some extent, he told a press conference during the Third
Session of the 10th National People's Congress, China's top
legislature.
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China's forex reserve, which rocketed to US$609.9 billion -- second
only to Japan -- at the end of 2004, consist largely of trade
surpluses, non-trade surpluses and capital investment from
overseas, said Zhou, governor of the People's Bankof China.
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As a matter of fact, the reserve started to surge not in 2004, but
as early as 2002, on the backdrop of China's economic start-up
following the Asian financial crisis, he said.
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Forex reserve should be denominated in a number of currencies
(instead of the US dollar alone) and comprise diversified products
in a bid to award off risks, Zhou said in reply to a German
reporter's question on whether China would hold more
euro-denominated assets.
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"We have long attached importance to the holding of a certain
amount of euro assets," the central banker said.
State banks to go public soon
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The top banker also revealed that the planned share-offerings and
listings of state-owned Bank of China (BOC) and China Construction
Bank (CCB) are "not too far away".
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The banks' stock market debuts should be decided by their board of
directors and depend on whether there are "windows of opportunity"
on the capital market, he said.
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The banks were also consulting overseas and domestic investment
banks, their financial advisers and accounting firms regarding the
timing, Zhou added.
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Both the BOC and CCB have completed financial reshuffle and need to
strengthen corporate governance and push on some internal reforms,
he said.
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The BOC and CCB, considered as financially healthier banks among
China's Big Four that also include the Industrial and Commercial
Bank of China (ICBC) and Agricultural Bank of China (ABC), are
leading the government's latest, aggressive reform in the vital
financial system.
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They received a combined US$45 billion in foreign exchange reserves
at the end of 2003 from the central government aiming to bolster
their balance sheets.
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The bailout package has helped the BOC and CCB raise their capital
adequacy ratios (CARs), being a measure of their available capital
in proportion to their outstanding loans, to 8.62 and 11.95
percent, respectively, by the end of 2004.
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The BOC's and CCB's non-performing loan (NPL) ratios plunged to
5.12 and 3.7 percent, respectively, by the end of last year,
according to a report delivered at the press conference.
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The banks have both become joint-stock firms with a governance
structure featured by a shareholders' meeting, board of directors,
board of supervisors and senior management, which have all started
operation.
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The BOC has done away with all government ranks of its staff,
urging its 230,000-strong employees to vie for new jobs in the
bank.
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A new company, the central Huijin Investment Co., was inaugurated
as major shareholders of the two banks to supervise their
restructuring. It is managed by former department heads of the
People's Bank of China with a board comprising representatives from
the State Administration of Foreign Exchange, Ministry of Finance
and the central bank.
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On Monday, Zhou Xiaochuan also revealed reform of the other two big
state banks -- the ICBC and ABC -- "will also advance in a similar
direction".
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"We should say that joint-stock reform of the ICBC and ABC will be
carried forward on the back of progress and experience achieved on
the BOC and CCB."
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He gave no details about whether the state would also inject hefty
funds into the ICBC and ABC. "Different banks will be given
different policies," he said.
(Xinhua News Agency March 7, 2005)