G.F. 326
CONFIDENTIAL #
-
7
-
monetary aggregates, particularly when computed on a year-on-year basis, were still rapid. Bank loans rose by 6% during the first half of 1988 to Rmb 957.6 billion at
the end of June 1988. Compared with June 1987, the growth
rate was 25.5%. Currency in circulation rose by 6.1% during the first half to Rmb 154.3 billion by the end of June 1988. Compared with June 1987, the growth rate was 35.9%. Thus the growth in money supply and credit has been accommodating the rapid growth of the economy and the
high rate of inflation.
15.
From 1 January to 30 June, cash held by the public increased by Rmb 8.8 billion, compared with a
decline of Rmb 8.3 billion during the same period last
year. Sustained growth in total wage bill has contributed
to this increase. In addition, because of fear that
prices may increase sharply following the removal of administrative controls, some Chinese residents prefer to
carry extra cash to ensure timely purchases. The low
deposit interest rate tends to reinforce this tendency.
16.
Precipitated by the sudden increase in the
demand for cash, there were reportedly runs on bank
branches and savings co-operatives in 43 counties in Guangdong Province.
17.
(ii) Exchange rate of Renminbi
The acceleration in China's inflation rate has
generated speculation about a devaluation of the Renminbi. Considerable controversy still exists among the Chinese leaders over the desirability of currency
de valuation. However, regardless of their decision, China
has in fact allowed a 'de facto' depreciation of its
currency by permitting more foreign exchange transactions
in foreign exchange adjustment centres. It was reported
CONFIDENTIAL #≈