The People's Bank of China, China's central bank, issued a
record 210 billion-yuan (US$26.9 billion) in certificates on
Tuesday to draw excess currency from commercial banks.
The value of the certificates topped the 170 billion yuan taken
from the banking pool last week, when the central bank released two
batches of bills.
The move followed a hike of half a percentage point in the
banks' reserve ratio Monday, which was estimated to have taken
another 150 billion yuan out of circulation.
Analysts say the effort shows the central bank is determined to
reduce the country's liquidity, which remains rampant due to the
rocketing trade surplus and foreign investment as well as mounting
domestic savings.
China's trade surplus last year soared 74 percent to a record
US$177.47 billion, while it used more than US$63 billion of foreign
direct investment, 4.47 percent up over the previous year.
Meanwhile, savings went up by nearly 12 percent year on year to
4.93 trillion yuan, prompting the banks to lend a record 3.18
trillion yuan.
An interest rate hike was inevitable, as reserve ratio
adjustments and open market operations had proved ineffective in
curbing excess liquidity, Wu Jinglian, a leading economist, was
quoted as saying by Monday's Information Times.
So far this year, the central bank has issued certificates four
times, with a combined value of 460 billion yuan.
(Xinhua News Agency January 17, 2007)