China Financial System The China financial system is highly regulated and relatively underdeveloped, but has recently begun to expand rapidly as monetary policy becomes integral to its overall economic policy. As a result, banks are becoming more important to the economy by providing increasingly more finance to enterprises for investment, seeking deposits from the public to mop up excess liquidity, and lending money to the government. As would be expected, the China banking system is also highly regulated with six major banks, each having specific tasks and duties. The People’s Bank of China is the largest bank in the PRC and acts as the Treasury. It also issues currency, monitors money supply, regulates monetary organizations and formulates monetary policy for the State Council. The Bank of China manages foreign exchange transactions and manages foreign exchange reserves.
The China Investment Bank distributes foreign capital from a variety of sources, and the China International Trust and Investment Corporation (CIVIC) was previously a financial organization that smoothed the inflow of foreign funds, but is now a full bank, allowing to compete for foreign investment funds with the Bank of China. The People’s Construction Bank lends funds for capital construction projects from the state budget, and finally the Agricultural Bank of China functions as a lending and deposit taking institution for the agricultural sector. China’s Closed Capital Market A further indication of the difference between China and the crisis countries, and of the insulation of the Chinese financial system, is the experience in the foreign exchange market. The RMB is not a freely convertible for capital account transactions.
The Essay on Chinas Use Of Capital Punishment part 1
Chinas Use Of Capital Punishment Human rights framework treats foreign policy as the result of a two-level game in which both domestic and foreign factors have to be considered. The increasing attention given to human rights issues in contemporary foreign policy. At the same time, most states that identify with human rights, including liberal democratic states, are reluctant most of the time to ...
The specific approval of the State Administration of Foreign Exchange (SAFE) is required before any RMB can be sold or bought for foreign currency if the transaction is not for settlement of a trade or service transaction (and even for trade or service settlements documentary proof is required by the bank before it will buy or sell RMB for foreign currency).
Portfolio investment into China-i. e. , the purchase of RMB-denominated securities-by non-residents is forbidden. Unless they receive special permission from SAFE, Chinese residents are forbidden to have accounts outside of China and to purchase overseas securities.
Most Chinese companies must sell any foreign exchange earned from exports to Chinese banks. Foreign currency loans are not generally allowed to be converted to RMB; they should be used only to settle import transactions. Foreign direct investment capital may be converted to RMB, but this is strictly monitored and subject also to approval and verification by the banks. All these restrictions and rules have the effect of insulating the RMB from any speculative pressure, so that its exchange rate versus other currencies-particularly the U. S. dollar-is “managed” by the PBO C.
Table 28. 4 shows what happened to the currencies of the crisis countries during 1 997~evaluations versus the U. S. dollar in some cases of nearly 60 percent from their highs. The RMB (called CNY in international markets) remained essentially stable with some upward movement during 1997.
The Essay on The purchasing of domestic or foreign currency
The purchasing of domestic or foreign currency is an approach used by the central bank in countries with fixed exchange rates to keep the rate stable. To maintain the exchange rate, the central bank will buy its own currency when the demand for it is low. For example, the country in question is country A, with an exchange rate of 2units(U) per dollar(S)–U2=$1. If A has more imports than ...
