The Central Bank is the only monetary policy-making and policy-executing entity in the Republic of China. Its organization structure is split into two independent entities: The decision-making body and the decision-executing body. The decision-making body, which is more important, is composed of three parts, the Board of Directors, the Board of Supervisors and the Governor & Deputy Governors. The board of Directors is the highest decision making body of the Bank. It consists of eleven to fifteen directors nominated by the Cabinet (Executive Yuan) and appointed by the President. Five to seven directors of the Board are designated as Executive directors. According to the Central Bank of China Act, the Governor of the Central Bank, the Minister of Finance and the Minister of Economic Affairs are the ex-officio directors and executive directors. All Directors, except the ex-officio directors, are appointed for a term of five years and can be reappointed upon the expiration of their term. The Board meets four times a year. Currently, the Board consists of fifteen members, of whom six are concurrently executive directors.
[...] These three objectives are: to promote the Chinese financial stability, to ensure sound banking operations and to maintain the stable internal and external value of the currency. In order to achieve these goals, the Central Bank of China has recourse to different tasks. First, the monetary management; through multiple policy instruments, it reaches its monetary policy objectives. Second, considering the Foreign Exchange Management, the Central Bank does not intervene that often; it does so only if the foreign exchange market is exceptionally disrupted in order to maintain financial stability. [...]
[...] On January the PBC introduced the market-maker system and OTC transactions in the inter-bank spot foreign exchange market. Taking into consideration the difficulties of small and medium-sized financial institutions in securing credit authorization in the early days, the PBC decided to keep automatic price-matching transactions in the inter-bank spot foreign exchange market to meet the needs of small and medium-sized financial institutions for foreign exchange transactions. IV. Strengths and weaknesses (including analysis of the bad loan situation) Like other Asian tigers, China has some weaknesses in its banking system, but China's vulnerabilities seem to be different from the other Tigers'. [...]
[...] Since the Chinese government's external assets far exceed its external debts (including contingent foreign currency liabilities in the banking sector), its external balance sheet would be hurt by an appreciation, not by depreciation. This part also includes an overview of the famous bad loans situation. As we know, China suffers from one weakness no Asian tiger has fully matched: Despite significant improvements in the balance sheets of Chinese banks in 2004 and 2005, China's bank balance sheets are generally in far worse shape in the midst of China's boom than the banks in the Asian tigers were in the midst of their boom(s?). [...]
[...] Monetary policy conduct In the first quarter of 2006, the PBC, (People's bank of China) under the leadership of the Central government, pursued a scientific development approach in a comprehensive manner and continued to implement a sound monetary policy by appropriately controlling money and credit aggregates, strengthening liquidity management in the banking system and enhancing the credit structure. It steadily advanced the exchange rate regime reform, accelerated the reform of financial enterprises and the construction of the financial market infrastructure and improved foreign exchange management. [...]
[...] In the first quarter, focusing on the task of promoting the basic equilibrium of the BOP, the foreign exchange management system reform was accelerated by launching a string of policy measures: First, the short-term external debt management approach and statistical coverage of domestic and foreign banks were unified to curb the overly rapid growth momentum of short-term external debts. Second, the Qualified Foreign Institutional Investors (QFII) scheme was further improved. In the first quarter, an investment quota totalling US$325 million of QFII was approved. [...]
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