قدرت مالی بانک مرکزی و هزینه سترون سازی در چین

Using a unique monthly data set over the period 2000:1–2008:12, this paper presents empirical findings on China's central bank, the People's Bank of China, from the viewpoint of its financial strength and the cost of monetary policy instruments. The results show that PBoC is constrained by the costs of its monetary policy instruments. PBoC tend to use less costly but market-distorting instruments such as the deposit interest rate cap and reserve-ratio requirements, rather than more market-oriented but more costly instruments such as central bank note issuance. These costs remain under control today, but may rise in the future as PBoC accumulates more foreign assets. This, in turn, will jeopardize the Chinese monetary authority's capability to maintain price stability.

It was first formally stated by Robert Mundell and Marcus Fleming, as a corollary of their Keynesian model of an open economy, that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy (Fleming, 1962 and Mundell, 1960), known as the “Incompatible Trinity” (Rose, 2000). It's been more than four decades since their works were published; yet the predictive power of their pure-theoretical assertion becomes more and more recognized as one pillar of the Trinity – free capital movement – is strengthened by the more integrated global financial market. Central banks of countries with a liberalized capital account for the most part found it extremely hard to maintain a fixed or less fluctuating exchange rate while keeping track of domestic money supply at the same time. Their central banks tried to use open market operations to offset impacts of foreign capital inflows and outflows on domestic credit, but these attempts are often costly and unsustainable in the long run. Such attempts could lead to financial turmoil: interventions on exchange rate are widely considered as one of the causes of financial crises of Latin American countries during 1980s and that of East-Asian countries during late 1990s. In the end there aren't much choices left for the central banks, but either to let the exchange rate to free float and bear the fluctuations, or to give up monetary sovereignty by adopting a currency-board-alike regime, join a currency union, or go for dollarization. China appears to be an outlier who hasn't suffered much from the pain of financial globalization. The US dollar/Chinese yuan exchange rate remained fixed for over a decade, e.g., 1994–2005. In 2005 the People's Bank of China (PBoC), announced they were abandoning the fixed exchange rate in favor of a managed float peg against a basket of currencies. Yet, the fluctuation of USD/CNY exchange rate is still minor by international standards. The PBoC have actively employed monetary policy instruments to manage domestic credit supply and maintain a stable price level. Fig. 1 presents China's broad money supply and consumer price index over the 1994–2008 periods. We note that PBoC successfully ended the hyperinflation of the mid-1990's and were able to keep a relatively stable level of inflation afterward, apart from a shorter period of deflation during the Asian financial crisis. Full-size image (16 K) Fig. 1. China M2 growth and CPI, 1994–2008. Figure options This leads us to the intriguing question of how China is capable of carrying out effective monetary policy while at the same time keeping the exchange rate fixed. To preview the answer, this paper shows that such ability to a large extent owes to the relatively low cost of PBoC's sterilization operations. Based on estimations from the publicly reported balance sheet of PBoC, we show that PBoC retained positive gains for every single year since 2000,1 despite explosive international reserve accumulation in the same period. However, the sterilization capability was by no means achieved without cost. We argue that the observed low cost of sterilization comes at the expense of a repressed domestic financial environment2. Because interest rate on CNY nominated assets was kept lower than the return on capital the market otherwise would demand, PBoC had to employ other market-distorting policy instruments, such as raising deposit requirements or even directly setting lending quotas on banks. By doing so, it could reduce the volume of excess liquidity that needed to be sterilized by central bank note issuance, and thus lower the total cost of sterilization. These measures hindered the financial market from working efficiently. Nevertheless, the pressure for PBoC becomes increasingly intense as current account imbalance persists and foreign capital inflow continues. A loss of international reserve due to appreciation on CNY also becomes a concern. These issues stated above, if not properly resolved, will undermine China's financial stability in the long run. The remainder of the paper is organized as follows. The next section introduces the Chinese monetary authority: how it comes thus far, what is the current situation, and how it operates in this environment. Section 3 estimates the profitability of PBoC's operations from its assets and liabilities, and then estimates the different costs PBoC incurred when applying different policy instruments. We employ a model of central bank financial strength to illustrate PBoC's current situation and possible consequences in Section 4. Concluding remarks are given in Section 5.

This paper examines the current monetary policy regime of China's central bank, People's Bank of China (PBoC), from the specific viewpoint of PBoC's financial strength and the cost of its monetary policy instruments. How to maintain price stability under the circumstances of large foreign capital inflows from growing current account surpluses have become the main issue for China's monetary policy in the most recent decade. According to our findings, PBoC has successfully minimized the shock of foreign capital to money supply. However, this was achieved by holding interest rate at a relatively low level, sharply rising reserve requirement ratio, and sometimes even by direct intervention on the volume of loans made by commercial banks. Only as such was PBoC able to maintain the cost of its sterilization operations at a low level. In other words, the capability of Chinese authorities to conduct monetary policy is based on the repressed domestic financial markets. Identifying the most appropriate monetary policy in an increasingly integrated global economy is difficult for any developing-country central bank. It is not the purpose of this paper to answer whether China has adopted proper monetary policy for the last few years but, more importantly, from our results one can see clearly the connection between China's monetary policy and its financial market structure as well as the trade-off between sterilization costs and financial market efficiency faced by Chinese monetary authorities. As long as China's trade surplus and foreign capital inflows persist, it is likely that this trade-off will continue to play an important role in China's future monetary policy.