OnJanuary 29, the Monetary Policy Committee of the PBC held its first quarterlymeeting of 2003. It was pointed out at the meeting that the Renminbi interestrate and exchange rate should be kept stable for the time being taking intoconsideration of the current economic and financial developments both at homeand abroad. At the same time, efforts should be made to advance themarket-based interest rate reform in a steady way and improve the allocation offinancial resources. Financial services should be upgraded and commercial banksshould be encouraged to strengthen their operational mechanisms to increase financialsupport to the rural areas, small enterprises and the service industry. It wasemphasized at the meeting that, with improved economic climate, the trade-offbetween preventing financial risks and supporting economic growth should beproperly handled. More efforts should be made to strengthen credit management,improve loan quality and reduce the NPL ratio of the banking sector. Rapidgrowth of investment and credit in real estate development should be closelymonitored and relevant rules guiding the conduct of real estate credit businessshould be strictly observed to prevent credit risks in the real estate sector.

 

OnFebruary 9, the PBC, jointly with the Ministry of Finance and the StateEconomic and Trade Commission, reported to the State Council on the survey ofcredit guarantee for small and medium-sized enterprises.

 

OnFebruary 9, the PBC reported to the Committee of Finance and Economy of theNational People's Congress on the implementation of monetary policy in 2002 andmoney and credit planning in 2003.

 

OnFebruary 21, China's Monetary Policy Annual Report of 2002 was released.

 

OnFebruary 25, the frequency of open market operations was increased from one dayper week (every Tuesday) to two days per week (every Tuesday and Thursday).

 

OnFebruary 25, the primary dealer liquidity daily reporting system for the openmarket operations was established, with the aim of strengthening the monitoringand analysis of the liquidity positions of the primary dealers and improving theaccuracy of open market operations.

 

On March 5, the PBC approved HarbinCity Commercial Bank, Hefei City Commercial Bank and Guiyang City CommercialBank as the primary dealers in open market operation, increasing the totalnumber of primary dealers to 43.

 

OnMarch 14, the PBC, jointly with the Ministry of Foreign Trade and EconomicCooperation and the Ministry of Finance, issued the Guidelines forSupporting Domestic Enterprises to Contract Overseas Projects with Own Capital,which was aimed at strengthening the cooperation between the banking and tradesectors and supporting the enterprises to implement the "Going-out" strategy.

 

OnMarch 25, the approval procedures for the issue of bonds in the inter-bank bondmarket was streamlined. Treasury bonds and policy financial bonds no longerneeded the approval of the PBC each time they were issued in the inter-bank bondmarket.

 

OnApril 10, the RMB Real Effective Exchange Rate Monitoring System was set up tomonitor and analyze the trade-weighted exchange rate and bilateral realexchange rate of RMB.

 

OnApril 10, the PBC submitted to the State Council the PBC's 2002 Work Reporton Education Loans, which outlined past year's experiences and next year'splans.

 

OnApril 17, the PBC reported to the Committee of Finance and Economy of theNational People's Congress on the implementation of monetary policy in thefirst quarter of 2003.

 

OnApril 22, the PBC began to issue central bank bills in a continuous manner inthe national inter bank bond market.

 

On May 15, China Monetary PolicyReport of the first quarter of 2003 was released.

 

OnJune 5, the PBC issued the Notice on Further Strengthening the Management ofReal Estate Credit Business, requiring the commercial banks to strictlyimplement real estate credit policies and prevent relevant risks to promote thehealthy development of the financial services for the real estate sector.

 

OnJune 11, the PBC, jointly with the Ministry of Finance and the Ministry ofLabor and Social Security, issued a notice concerning the management of fiscalinterest subsidy fund for the small-amount guaranteed loans extended to the laid–offworkers engaging in small profit business, which was aimed at improving the policyof small-amount guaranteed loans to laid-off workers.

 

OnJune 19, the Monetary Policy Committee of the PBC held its Second quarterlymeeting of 2003. The Committee had an in-depth review of the current economicand financial development both at home and abroad and the policy measures to betaken in the coming months. It was agreed that the principle of expandingdomestic demand should be persistently observed and the sound monetary policybe continuously implemented to maintain the consistency and stability ofmonetary policy. Various monetary policy instruments should be flexibly usedand open market operations be strengthened to maintain steady growth of moneysupply and good momentum of economic and financial development. It wasemphasized that underlying financial risks in real estate development andlow-efficient duplicated constructions brought by rapid credit growth should beclosely monitored and prevented with strengthened credit risk early-warning andsurveillance arrangement. Meanwhile, loan structure should be further improvedto prevent new credit risks and to promote the reform of state-owned commercialbanks. It was also agreed that, in light of the current domestic and externaleconomic situation, the deposit and loan interest rates and the exchange rateof RMB should be kept stable, and market-based interest rate reform should besteadily advanced.

 

OnJune 27, the PBC issued a notice on the establishment of interim statisticssystem for the small-amount guaranteed loans to the laid-off workers.

 

OnJuly 2, the interest rate on small-amount foreign currency deposit was lowered.The one-year US dollar deposit interest rate was lowered from 0.8125 percent to0.5625 percent. The interest rate on small-amount deposit in pound sterling, SwissFranc and Canadian dollar was liberalized, allowing the commercial banks to setand publish their own rates.

 

OnJuly 15, the PBC reported to the Committee of Finance and Economy of the NationalPeople's Congress on the implementation of monetary policy in the first half of2003 and work plan for the second half of 2003.

 

OnJuly 16, the PBC, jointly with the Ministry of Finance, the State Developmentand Reform Commission and the Ministry of Labor and Social Security, released anotice on issues concerning the management of small- amount guaranteed loans tothe laid-off workers with the aim of further improving relevant policies.

 

OnJuly 18, the PBC summoned the financial institutions to a window guidancemeeting, requiring them to pay attention to the potential decline in thecapital adequacy ratio, prevent credit and liquidity risks, improve internalassessment system and properly control aggregate credit.

 

OnJuly 24, the PBC transmitted to its branches a State Council document on thepilot reform program of the rural credit cooperatives, requiring them to obtainan overall and accurate understanding of the State Council's principles,policies and arrangements concerning the reform of the rural creditcooperatives, and to establish working groups to provide financial support tothe pilot reform program.

 

OnJuly 30, the mechanism for determining the RMB interest rate on export seller'scredit was reformed, with the rate determined by adding certain basis points tothe average yields of treasury bond.

 

OnAugust 1, the interest rate on the incremental postal saving depositsre-deposited at the central bank after August 1 was lowered to that on therequired reserves.

 

OnAugust 5, development of the new system for the outright cash buyingtransactions of open market operations was completed.

 

OnAugust 6, China Monetary Policy Report of the second quarter of 2003 wasreleased.

 

OnAugust 11, the PBC held a window guidance meeting, requiring the financialinstitutions to take measures to prevent credit and liquidity risks.

 

OnAugust 12, the rules governing information disclosure of securities companiesengaging in inter-bank lending market transactions were unified on a pilotbasis, which provided a guidance for the inter-bank lending centers to revisethe operational rules on information disclosure.

 

OnAugust 14, the business scope of over-the-counter transactions of book-entrytreasury bond was expanded, with more types of bond being allowed to be traded,and the regions conducting this business being expanded to Beijing, Shanghai,Jiangsu Province, Zhejiang Province, Fujian Province and Guangdong Province.

 

OnAugust 23, approved by the State Council, the PBC announced that effective September21, 2003, the deposit reserve ratio of the financial institutions would beraised from 6 percent to 7 percent. The reserve ratio of urban creditcooperatives and rural credit cooperatives would remain unchanged at 6 percent forthe time being.

 

OnAugust 23, the Monetary Policy Committee of the PBC held a discussion withexperts in macro economy and monetary policy, informing them of the decision toraise deposit reserve ratio and answering relevant questions. The experts expressedtheir views and opinions concerning this policy measure and the economic andfinancial developments in general.

 

OnSeptember 3, the PBC issued the Operational Rules on the Special CentralBank Bills for the Pilot Reform Program of the Rural Credit Cooperativesand the Regulations on Special Loans for the Pilot Reform Program ofthe Rural Credit Cooperatives, which clearly outlined the operationalprocedures for the PBC to provide financial support to the rural creditcooperatives.

 

OnSeptember 12, the PBC held a window guidance meeting for the third time in theyear, requiring the financial institutions to prevent credit and liquidityrisks.

 

OnSeptember 17, the General Administration Department of the PBC sent letters torelevant government departments and financial institutions to solicit theircomments on the General Rules for Loans.

 

OnSeptember 19, with the arrangement by the PBC, China Development Bank issued indomestic market the first US dollar denominated bond with the total amount ofUSD 500 million. The related technical issues such as the registration andcustody of the US dollar bond were also resolved.

 

OnSeptember 25, to promote the successful implementation of the deposit reservepolicy, the PBC conducted small-scale redemption of the central bank bills.

 

OnOctober 8, the PBC introduced RMB stress test indicators to regularly analyzethe pressures on RMB exchange rate.

 

OnOctober 15, the PBC reported to the Committee of Finance and Economy of theNational People's Congress on the implementation of monetary policy in thefirst three quarters of 2003.

 

OnOctober 18, the Monetary Policy Committee of the PBC held its third quarterlymeeting of 2003. The Committee reviewed the current economic and financialdevelopment both at home and abroad, and agreed that the good momentum ofeconomic and financial development should be maintained. Although some newdevelopments in current economic operation needed to be further examined,growth of money supply and credit was obviously faster than desired, whichcould possibly lead to low-quality economic growth and worsen structuralproblems, thereby damping the sustainable and healthy development of the economy.It was pointed out at the meeting that commercial banks should make efforts toprevent new credit risks, further improve loan structure, strengthen liquiditymanagement, and steadily advance various reforms, including strengtheninginternal control mechanism and corporate governance. It was also agreed thatcapital markets should be developed to diversify market products and to improvemonetary policy transmission. The Committee discussed monetary policy andmeasures to be adopted in the period ahead and concurred that the soundmonetary policy should be preserved and various monetary policy instruments be fleecilyemployed to ensure steady growth of aggregate money supply and credit and the continuityof the recent policy guidance. It was also agreed that, in light of the currentdomestic and external economic development, the interest rates on RMB loans anddeposits should be maintained basically stable, and market-based interest ratereform should be steadily advanced. In addition, it was desirable that the RMBexchange rate be kept basically stable and the mechanism for determining theRMB exchange rate be improved to promote the balance of international payments.

 

OnOctober 28, China Monetary Policy Report of the third quarter of 2003 wasreleased.

 

OnNovember 7, the PBC approved China Postal Savings and Remittance Bureau, Chinesecommercial banks and rural credit cooperatives to conduct negotiated depositbusiness with maturity longer than 3 years and the amount no less than RMB 30million yuan. The interest rate, maturity, mode of interest settlement andpayment and penalties for breaching the negotiated contract would be determinedupon consultation by the parties involved in the postal savings depositagreement.

 

OnNovember 20, the lower limit on the interest rate of small-amount foreigncurrency deposit of the financial institutions was removed, enabling thefinancial institutions to set their own interest rates below the upper limitset by the PBC.

 

OnDecember 10, approved by the State Council, the PBC decided to widen thefloating band of lending rates of the financial institutions. The commercialbanks and urban credit cooperatives would be allowed to set their lending ratesbetween 90 percent and 170 percent of the central bank's benchmark rate, andthe band for the rural credit cooperatives would be 90-200 percent of the benchmarkrate.

 

OnDecember 19, the Monetary Policy Committee of the PBC held its fourth quarterlymeeting of 2003. The Committee had an in-depth review of the current economicand financial development and price movement both at home and abroad. It wasagreed that the consistency and stability of the macroeconomic policies shouldbe maintained to make the macroeconomic management more scientific, forward–lookingand effective. The Committee discussed monetary policy and measures to beadopted in the period ahead and concurred that the sound monetary policy shouldbe preserved, interest rates of deposits and loans be maintained basicallystable, and market-based interest rate reform be advanced steadily. Themechanism for determining the RMB exchange rate should be further improved tokeep RMB exchange rate basically stable at an adaptive and equilibrium leveland to promote the balance of international payments. It was stressed at themeeting that the loan structure should be further adjusted to prevent creditflow to low-efficient and duplicated construction projects, and thatcoordinated development of the money market, capital market and insurancemarket should be pushed forward. The meeting also encouraged the commercialbanks to strengthen credit support to agriculture, small and medium-sizedenterprises, consumption and employment.

 

OnDecember 21, the PBC lowered the interest rate on excess reserves of thefinancial institutions from 1.89 percent to 1.62 percent, with the interestrate on required reserves remaining unchanged at 1.89 percent.

 

OnDecember 27, the Sixth Meeting of the Standing Committee of the Tenth NationalPeople's Congress passed a resolution to amend the Law of the People'sRepublic of China on the People's Bank of China. Among other changes, theamendment added "The Monetary Policy Committee of the People's Bank of Chinashall play an important role in macroeconomic management and monetary policyformulation and adjustment" to Article 12 of the previous Law, thus for thefirst time clearly stating the Monetary Policy Committee's functions in thelaw, and extending its role to macroeconomic management. Meanwhile, theamendment also clearly defined the PBC's supervisory role in the inter-banklending market and inter-bank bond market.

 

OnDecember 29-30, the PBC head office and relevant branches and sub-branches helda meeting on the PBC's financial support to the pilot reform program of therural credit cooperatives. Overall working plan was drawn up at the meeting,which marked the beginning of the PBC's support to the reform.