CHINA Ruby News
Ruby Zhu, China Economist of the Hong Kong General Chamber of Commerce. Email: ruby@chamber.org.hk
Vol III, No.11 November 2004
Vice Governor Li Ruogu met with Chamber members
s the Mainland’s monetary policy
and macro economic control
measures are under the spotlight,
the Chamber was honoured that
vice Governor of Bank of China Mr Li
Ruogu visited the Chamber to exchange
views with members on December 1.
Following are highlights from the meeting.
A
Mr Li gave an overview of China’s
economy, its economic growth, overseas
trade, foreign exchange reserves, and its
rising international position. He also
discussed current economic problems.
First, is the shortage of materials and
energy. The Mainland’s rapid development
is exerting immense pressure material and
energy markets (for example, steel and
bronze prices have experienced strong
fluctuations recently). This will impact the
sustainable development of China’s
economy, and explains why the Central
Bank
repeatedly
emphasised
that
economic growth would be maintained
around 7-8%.
The second problem is agricultural
development. Mainland peasants’ income
is
growing
slowly,
and
domestic
consumption is too weak to drive economic
development across the country. Stable
and substantially domestic demand is vital
to fuel economic development in the long
run.
The third problem relates to reforming
China’s financial system. If reforms are
successful, China’s economic development
is expected to accelerate. If not, the goal of
quadrupling China’s GDP by 2020 will not
be met.
disciplines of a market economy. This is
why China accepted the three controversial
projectionist terms at the cost of joining the
WTO. A market system is crucial for China
to align itself with the global market.
Mr Li answered a number of questions
raised by members attending the meeting.
When asked about the impact of the rate
hike on the loan market, Mr Li said it is
difficult to measure the impact at this point
as loan volumes usually decline in the
fourth quarter, yet deposit growth rates
have climbed (the first time this year)
following the hike.
Members also asked about RMB
appreciation. Mr Li frankly indicated the
Central Bank would keep exchange rates
stable under the current situation. Although
US dollar depreciation would increase the
cost of imports, it has not significantly
affected China’s inflation as most exports
are processing orders with materials in
stock. He believes the USD may continue
depreciating but a collapse is unlikely. Even
if this happen, the Central Bank will be able
to deal with it. A slight appreciation in the
RMB does not mean much to China,
however, if the appreciation is substantial,
China’s agricultural products would be
come under pressure.
Members were also concerned if RMB
appreciation would impact Hong Kong’s
peg. Mr Li said the Central Government
would not open the gate to any measures
that are likely to harm Hong Kong. China
wishes to see Hong Kong prosper under
the “one country, two systems” principle.
Therefore, Hong Kong is always the
Mainland
government’s
prime
consideration in policy making.
Lastly, Mr Li talked about adopting the
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