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operations are
of government.
under
accommodative
At
subject to heavy influence from other parts
At the central government level, PBOC is direct supervision of the State Council and has to be
to the demands of the main ministries.
the provincial and local levels, the various branches of
PBOC have to succumb to the local authorities, which means
that very often they have to reconcile instructions from
the local authorities against those from the PBOC
headquarters.
6.
the local
A
good demonstration of the strong influence of
authorities on PBOC's credit policy is the
issuance of IOUS in lieu of cash to peasants for grain
procurement. Reportedly most of the funds originally
reserved in the local bank branches for grain purchases been diverted by the local authorities for undertaking
real estate projects, for establishing unauthorised
economic development zones, or for investing in the
prosperous coastal areas.
have
7.
The Chinese government has repeatedly stated the goal of transforming PBOC into a truly central bank and
hiving off the commercial
state specialised banks.
long-drawn-out exercise.
banking functions to the five
This is going to be a Currently the specialised banks
are involved in the provision of
both policy loans and
commercial loans.
While policy loans are generally
allocated by administrative means to projects budgetted by
the state, commercial loans should be granted on the
business merits of the projects in the light of viability
The problem is that, nowadays in China, these two types of loans cannot always be distinguished and
that, very often, PBOC is obliged to back up the
specialised banks but without knowing exactly or being able
to control what the loans involved will eventually be
considerations.
utilised for.
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