Report: Liquidity high but manageable

BIZCHINA / Center

Report: Liquidity high but manageable

(chinadaily.com.cn)
Updated: 2007-07-09 15:40

China's liquidity is high, according to a research report on China's
liquidity by Xia Bin, head of financial research at the Development
Research Centre of the State Council.

Related readings:
 Central bank to apply consistent, moderate tightening policies
 Special bond issue won't seriously impact liquidity
 M2 growth underestimates inflation pressure

The report noted that China's huge trade surplus pressured the central
bank to increase the currency supply. So far, however, the increased
levels of base currency supply have been controlled by the central bank.
Many had assumed the result would be a liquidity flood driven by the
imbalance of international payments.

According to the report, fluctuations of the consumer price index in
recent months were caused by hikes in oil and food prices and adjustment
orders from the government. Except for property prices, overall prices
remain low.

Also according to the report, the current liquidity is a result of
endogenous factors like the booming stock market, which has funneled
deposits out of banks. Therefore, the excess liquidity will have less of
an impact on the actual economy than on virtual economies like securities
markets.

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20071123 Extracted from http://www.hellomandarin.net