OREANDA-NEWS. March 23, 2012. In early 2011, the PBC introduced the dynamic adjustment mechanism for differentiated deposit reserve requirement to improve the macro-prudential policy framework, reported the press-centre of PBC.

On January 6, after consultation with the National Development and Reform Commission and the Ministry of Commerce, the PBC and the SAFE jointly issued the Administrative Rules on Pilot RMB Settlement for Outward Direct Investment (PBC Document [2011] No.1), allowing commercial banks and enterprises located in areas and covered by the pilot cross-border RMB trade settlement scheme to conduct RMB settlement for outward direct investment business.

On January 14, the PBC announced that it would raise the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from January 20, 2011.

On January 25, the PBC reported to the Finance and Economic Committee of the National People’s Congress on implementation of the monetary policy in 2010.

On January 30, the Monetary Policy Report for Q4 2010 was released.

On February 9, the PBC decided to raise the RMB benchmark deposit and loan rates of financial institutions. The one-year benchmark deposit rate was raised from its current level of 2.75 percent to 3 percent, up 0.25 percentage points. The one-year benchmark loan rate was raised from its current level of 5.81 percent to 6.06 percent, up 0.25 percentage points. The benchmark rates on deposits and loans of other maturities and mortgage loans supported by provident housing funds were adjusted accordingly.

On February 14, in order to further enrich products traded on the foreign exchange market and provide enterprises and banks with more tools for hedging exchange-rate risks, the SAFE issued the Notice on Issues Relating to RMB-FOREX Options Trading (SAFE Document [2011] No.8) , allowing the China Foreign Exchange Trade System to launch RMB-FOREX options trading on the interbank foreign exchange market.

On February 18, the PBC announced it would raise the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from February 24, 2011.

On February 22, the PBC General Administration Department issued the Notice on Increasing Credit Lines of Central Bank Lending to Agriculture to Support Key Areas to Make Proper Financial Arrangements for Combating Drought (PBC General Administration Department Document [2011] No.45), which would increase the central bank lending credit line by 10 billion yuan for 8 drought-affected provinces, including Henan, Shandong and Hebei, so as to support and guide financial institutions to make their utmost efforts to provide proper financial services for the anti-drought work, support a stable increase in agricultural production, and ensure a bumper harvest.

On March 18, the PBC announced it would raise the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from March 25, 2011.

On March 18, in order to guide the cross-border fund flow, pre-empt inflows of illegal and irregular funds, and safeguard China’s financial security, the SAFE issued the Notice on Strengthening Foreign Exchange Administration (SAFE Document [2011] No.11).

On March 25, the Monetary Policy Committee of the PBC convened its first regular quarterly meeting in 2011.

On March 28, the 20th regular meeting of the committee that reviewed the redemption of special central bank notes under the pilot program initiated by the PBC for the reform of rural credit cooperatives (RCCs) decided to redeem central bank notes issued to RCCs in Duchang and 18 other counties and county-level cities in 4 provinces/autonomous regions, including Hainan Province, with a total quota of 1.99 billion yuan.

On March 31, the PBC General Administration Department issued the Notice on Earnestly Implementing Measures for Encouraging Financial Institutions with Legal Entities at the County-level to Use Some Portion of Their Incremental Deposits for Local Lending and Measures Concerning Follow-up Monitoring, Assessment, Motivation, and Constraint of Post-redemption of Special Central Bank Notes of Rural Credit Cooperatives (RCCs). According to the Notice, from April 1, 2011 to March 31, 2012, financial institutions with legal status at the county-level that have used some portion of their incremental deposits for local lending, shall be subject to deposit reserve requirement ratio one percentage point lower than other applicable financial institutions. In the meantime, for those 425 rural credit cooperatives at county-level and 16 township banks that have met both the requirement of using some portion of its incremental deposits for local lending and post-redemption monitoring and assessment standard, 20 billion yuan of additional agro-linked central bank credit quota was extended to them.

On April 6, the PBC decided to raise the RMB benchmark deposit and loan rates of financial institutions. The one-year benchmark deposit rate was raised by 0.25 percentage points from 3 percent to 3.25 percent, and the one-year benchmark loan rate was raised by 0.25 percentage points from 6.06 percent to 6.31 percent. The benchmark rates on deposits and loans of other maturities and personal provident housing funds were adjusted accordingly.

On April 9, the PBC issued PBC Decree [2011] No.3, establishing specific rules for management of trading on the interbank bond market by introducing rules on disclosure of significant abnormal trading and on ex-ante reporting of abnormal trading for the purpose of further regulating trading behavior on the interbank bond market.

On April 14, the PBC reported to the Finance and Economy Committee of the National People’s Congress on implementation of monetary policy in the first quarter of 2011.

On April 15, the PBC and the MOF jointly issued PBC and MOF Decree [2011] No.6, establishing specific requirements for market-making of newly issued treasury bonds of key maturities, so as to further improve the market price discovery mechanism as well as the treasury bond yield curves.

On April 17, the PBC announced it would raise the RMB reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from April 21, 2011.

On April 18, the PBC and the New Zealand Reserve Bank signed a bilateral local currency swap agreement in the amount of 25 billion yuan/NZD 5 billion. The currency swap agreement would expire in three years, but could be extended with mutual consent.

On April 19, the PBC and the Central Bank of the Republic of Uzbekistan signed a bilateral local currency swap agreement in the amount of 700 million yuan/167 billion UZS. The currency swap agreement would expire in three years, but could be extended with mutual consent.

On May 3, the China Monetary Policy Report for Q1 2011 was released.

On May 6, the PBC and the Central Bank of Mongolia signed a bilateral local currency swap agreement in the amount of 5 billion yuan/10 trillion MNT. The currency swap agreement would expire in three years, but could be extended with mutual consent.

On May 12, the PBC announced it would raise the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from May 18, 2011.

On June 1, the Regional Financial Sector Performance Report for 2010 was released.

On June 13, the PBC and the National Bank of Kazakhstan signed a bilateral local currency swap agreement in the amount of 7 billion yuan/150 billion KZT. The currency swap agreement would expire in three years, but could be extended with mutual consent.

On June 14, the PBC announced it would raise the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from June 20, 2011.

On June 23, the PBC signed a new bilateral local currency settlement agreement with the Central Bank of the Russian Federation. With the signing of the agreement, bilateral local currency settlement will cover not only border trade but also general trade and it will have an expanded geographical coverage. According to the agreement, economic entities in the two countries will be able to conduct settlements and payments for trade in goods and services with the currency of their own choice, i.e., either a freely convertible currency or the RMB/the ruble. The agreement is expected to deepen financial cooperation and promote bilateral trade and investment between China and Russia.

On July 1, the PBC Monetary Policy Committee convened its second regular quarterly meeting of 2011.

On July 7, the PBC decided to raise the RMB benchmark deposit and loan interest rates of financial institutions. The 1-year benchmark deposit rate was raised by 0.25 percentage points, from 3.25 percent to 3.50 percent, and the 1-year benchmark loan rate was raised by 0.25 percentage points, from 6.31 percent to 6.5 percent. The benchmark rates on deposits and loans of other maturities and on personal provident housing funds were adjusted accordingly.

On July 14, the PBC reported to the Finance and Economy Committee of the National People’s Congress on implementation of the monetary policy in the first half of 2011.

On July 15, the PBC issued the Notice on Conducting an Assessment of the Effects of Policy Guidance on Agro-linked Loans (PBC Document [2011] N0. 181), specifying that starting from 2011 PBC branch offices will conduct assessments of the effects of policy guidance on agro-linked loans for county-level financial institutions, so as to encourage financial institutions to better serve agriculture, rural areas, and farmers, and improve the effects of policy guidance for agro-linked loans.
 
On July 22, the PBC issued the Notice on Assessing the Effects of Policy Guidance on SME loans (PBC Document [2011] N0.185), specifying that starting from 2011 PBC branch offices will conduct assessments of the effects of policy guidance on SME loans for financial institutions at the provincial level or below, so as to encourage financial institutions to upgrade their services to SMEs and to improve policy guidance for SME loans.

On August 4, the PBC jointly with the China Banking Regulatory Commission issued the Circular on Provision of Quality Financial Services for Public Rental Housing and Other Government-subsidized Housing Projects (PBC Document [2011] No. 193), clarifying and reiterating the credit-support policy for government-subsidized housing projects, including public rental housing, and requiring banking financial institutions to step up credit support to government-subsidized housing projects on the premises of strengthened management and risk prevention.

On August 12, the China Monetary Policy Report for Q2 2011 was released.

On August 22, the PBC, jointly with five other ministries and government agencies, issued the Notice on Extending the Geographical Coverage of the Use of RMB for cross-border Trade Settlement (PBC Document, [2011] No. 203), extending the geographical coverage of cross-border trade settlement in RMB to the entire nation.

On September 14, in order to facilitate RMB/ruble trading on the Moscow Interbank Currency Exchange (Micex), the PBC issued the Notice on RMB Clearing on the Moscow Interbank Currency Exchange (Micex) (PBC Document [2011] N0. 222), allowing Russian commercial banks that conduct ruble/RMB trading on the Micex to open special RMB accounts in commercial banks located in China that are dedicated to clearing RMB funds resulting from such trade.

On September 28, the PBC Monetary Policy Committee convened its third regular quarterly meeting of 2011.

On October 12, the PBC reported to the Finance and Economy Committee of the National People’s Congress on implementation of the monetary policy in the first three quarters of 2011.

On October 14, the PBC issued the Administrative Rules on Settlement Business of Foreign Direct Investment Denominated in RMB (PBC Announcement [2011] No. 23), stipulating that banks can, according to relevant laws and regulations, start to provide settlement services to overseas investors who have made RMB denominated direct investment in China.

On October 26, the PBC signed an agreement with the Bank of Korea to renew the bilateral local currency swap arrangement and to increase its size from 180 billion yuan/38 trillion won to 360 billion yuan/64 trillion won. The effective period of the renewed arrangement will be 3 years, and could be extended by agreement between the two sides.

On October 26, the PBC issued the Guidelines on RMB Loans for Overseas Projects by Domestic Banking Financial Institutions (PBC Document [2011] No. 255), which explicitly regulated the overseas RMB project loan business of domestic banks, in order to regulate and promote the overseas RMB loan business.

On November 16, the China Monetary Policy report for Q3 2011 was released.

On November 22, the PBC and the Hong Kong Monetary Authority signed an agreement to renew the bilateral currency swap arrangement and to increase its size from 200 billion yuan/HKD 227 billion to 400 billion yuan/ HKD 490 billion. The currency swap agreement would expire in three years, but could be extended with mutual consent.

On November 25, the 21st regular meeting of the committee that reviewed the redemption of special central bank notes under the pilot program initiated by the PBC for the reform of rural credit cooperatives (RCCs) decided to redeem central bank notes issued to RCCs in Liaoyang county and 10 other counties and county-level cities in 6 provinces/autonomous regions, including Liaoning Province, with a total quota of 1.084 billion yuan.

On November 30, the PBC announced it would cut the RMB deposit reserve requirement ratio for deposit-taking financial institutions by 0.5 percentage points, effective from December 5, 2011.

In November, four provinces and municipalities including Shanghai, Guangdong, Zhejiang and Shenzhen began to issue municipal bonds on a pilot basis, with an issuance volume of 7.1 billion yuan, 6.9 billion yuan, 6.7 billion yuan, and 2.2 billion yuan respectively on the interbank bond market.

On December 16, the China Securities Regulatory Commission, jointly with the PBC and the SAFE, released the Provisional Administrative Rules for Pilot Program of Allowing Fund Management Companies and Securities Companies Approved as Renminbi Qualified Foreign Institutional Investors (RQFII) to Invest in Domestic Securities Market (CSRC, PBC and SAFE Decree No. 76), allowing Hong Kong subsidiaries of domestic fund management companies and securities companies to use their RMB funds raised in Hong Kong to invest in domestic securities market within a pre-approved investment quota.

On December 19, the trading of the yuan against the Thai Baht was launched on the interbank market in Yunnan Province.

On December 22, the PBC signed with the Bank of Thailand a bilateral local currency swap agreement in the amount of 70 billion yuan or 320 billion Thai Baht. The effective period of the arrangement will be 3 years, and could be extended by agreement between the two parties.

On December 23, the PBC signed with the State Bank of Pakistan a bilateral local currency swap agreement in the amount of 10 billion yuan or 140 billion Pakistan Rupee. The effective period of the arrangement will be 3 years, and could be extended by agreement between the two parties.

On December 27, the PBC jointly with other 4 ministries and commissions, released the Notice on Strengthening Regulation of Gold Exchanges and Other Gold Trading Platforms, (PBC Document [2011] No. 301), stipulating that except for the Shanghai Gold Exchange and the Shanghai Futures Exchange, no other localities, institutions or individuals can establish gold exchanges (centers), or establish gold trading platforms within existing exchanges (centers). Banking financial institutions should cease to provide intermediary services to illegal gold exchanges or platforms, such as account opening, custody, fund transfer, agent trading and investment counseling.

On December 28, the PBC Monetary Policy Committee convened its fourth regular quarterly meeting of 2011.

On December 31, the PBC released the Announcement of the People’s Bank of China Concerning the Implementation of Measures for the Pilot Program of Allowing Fund Management Companies and Securities Companies Approved as Renminbi Qualified Foreign Institutional Investors (RQFII) to Invest in Domestic Securities Market (PBC Document [2011] No. 321), in order to further regulate the behaviors of the pilot institutions, including account management, inward/outward remittance, asset allocation, investment in the interbank market, and information reporting and so forth.