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intention is to incorporate the attainment of balance of
payments equilibrium as one of the essential monetary
policy objectives within the overall framework of
macro-economic decision-making, particularly with regard
to maintaining an equilibrium between aggregate supply and
demand in the economy, as well as between the supply of
and the demand for internationally traded commodities.
10.
Operating within an overall framework for
monetary and foreign exchange management, the PBOC can
grant loans in foreign currencies to banks and other financial institutions dealing with foreign exchange
business provided that it has enough foreign exchange at
its disposal. A certain amount of foreign exchange will
also be allocated to local government agencies in order to
meet their need to finance some corporations and
enterprises within their jurisdiction.
11.
In line with the open door policies and the economic reform and modernisation programmes adopted by China since late 1978, the scope for guidance planning
relying on economic levers has expanded at the expense of
mandatory planning which relies solely on administrative
measures. Consistent with this development, the PBOC
intends to make greater use of such market devices as
variations in exchange rates, in interest rates, and in
reserve requirements for foreign currency deposits so as
to regulate the supply of and demand for foreign
exchange. Consideration is also being given to the establishment of a reserve management system during the "Seventh Five-Year Plan" period for monitoring foreign exchange flows (2).
(2) This is quoted from an article on 'China's financial
reform and environment for investment' presented to a conference in 1986 by Dai Lunzhang, Chief Economist of the International Department of the People's Bank of China.
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2.
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