Economic Policies - Essay Example

Download file to see previous pages... Such happened after the People’s Bank of China (PBOC) permeated 36 billion yuan (or HK$45.2 billion) to be fed to its banking system via bills and forward bond repurchase agreements which motivated short term loans in the market that was scaled up last month (Reuters, 2013, p. 1; The Economist, 2013, p. 1). Banking sector current condition While they are hopeful that the money market rates will be normalized by July, but economists began to note that the bond repurchase in seven days slumped to 69 bps to 4.76 % since June, the zenith period for liquidity squeeze (Reuters, 2013, p. 1). The overnight repossession rate dropped 63 bps to 3.79 % and the 14-day rate lurched nearly 100 bps to 5.09% based on reports (Reuters, 2013, p. 1; The Economist, 2013, p. 1). ...
1; The Economist, 2013, p. 1). Critics pointed that China lacked the capacity exercise the standard monetary policy and governance pointing the lack of better stimulus packages that is best exercised by the Japanese government (The Economist, 2013, p. 1). It is most poised for deleveraging its system noting how its credit system grows expediently than its annual growth domestic product (GDP) (The Economist, 2013, p. 1). The total social financing lowered its ratio hence, affecting its interbank fiscal condition with the cash at critical situation. Need for reform Some critics recommended that structural reform should be undertaken for Chinese banking system, suggesting the need to undertake initiatives to liberalize the interest rates and to raising prices of utilities. The problem is further exacerbated by the heavy public spending and tax cuts (Dobson & Kashyap, 2006, pp. 103-108). Its economy is likewise heavily dependent on exports and its government needs to grapple with its high level economic issues with its neighbours and with countries with which they have trading relations (Dobson et al., 2006, pp. 103-108). The credit ratio of the country also scaled up, higher than what they have from its monetary conditions in the past. While it’s admitted that increasing credits for domestic entrepreneurs of China could help improve the resource needs of these small businesses but the returns remained undertrained, and so is the payment (Dobson et al., 2006, pp. 103-108). It is not likewise certain if these entrepreneurs possessed such credit worthiness that would warrant fast and expedient repayment of loans and interests, especially so that most ...Download file to see next pagesRead More