GF 323
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機密
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bank coordination. Their activities may further undermine
the effectiveness of China's monetary policy.
16.
Also partly reflecting the tightening of the
supply of Renminbi, its exchange rates in the foreign
exchange adjustment centres and the black market were
(15) reported to have strengthened considerably
In
time, the restraint on credit and monetary expansion
should have some favourable impact on inflation.
•
17.
In mid-January, the People's Bank of China
(PBOC) announced that deposit rates would be raised by an
average of about three percentage points from February
1989 (for instance, the fixed interest rate on new
one-year deposits increased from 8.64% to 11.34%, that on
three-year deposits from 9.72% to 13.14% and that on
eight-year deposits by a larger magnitude from 12.42% to 17.64%); and interest rates on loans, apart from those in priority areas such as energy and transport, would increase by slightly less (from 9% to 11.34%). Since September 1988, in order to attract more deposits, an inflation subsidy rate has been added on top of the fixed rates for deposits of maturity periods lasting three years or longer. This inflation subsidy rate is normally altered at quarterly intervals with reference to the rate of inflation during the preceding quarter. But it can also be altered more frequently, particularly if there is a change in the fixed rates. The total yield (fixed rate plus inflation subsidy rate) for three-year deposits is now at about 25%. Despite this it appears that few Chinese are willing to place their deposits for maturity
(15) In Shenzhen's black market, the exchange rate of
Renminbi had moved up to around Rmb 85/HK$100 by the end of December 1988. This compared with a low of around Rmb 110-120/HK$100 in early October 1988.
CONFIDENTIAL #