TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 97

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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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