China's Central Bank: [Essay Example], 731 words GradesFixer
exit-popup-close

Haven't found the right essay?

Get an expert to write your essay!

exit-popup-print

Professional writers and researchers

exit-popup-quotes

Sources and citation are provided

exit-popup-clock

3 hour delivery

exit-popup-persone
close
This essay has been submitted by a student. This is not an example of the work written by professional essay writers.

China's Central Bank

Download Print

Pssst… we can write an original essay just for you.

Any subject. Any type of essay.

We’ll even meet a 3-hour deadline.

Get your price

121 writers online

blank-ico
Download PDF

China’s Central Bank Has $1.3 Trillion Money-Fund Headache China’s ever-growing money market funds pose an increasing problem for the nation’s central bank as policy makers attempt to boost the flow of credit to cushion an economic slowdown.

By Bloomberg News(Bloomberg) — China’s ever-growing money market funds pose an increasing problem for the nation’s central bank as policy makers attempt to boost the flow of credit to cushion an economic slowdown. While the funds have offered savers a handy alternative to risky stocks and once high-flying wealth management products, they’re effectively raising borrowing costs. That’s because, with some 8.6 trillion yuan ($1.3 trillion) according to the Asset Management Association of China, they’re sapping the flow of savings to banks, which in turn are having to pay the funds higher rates when taking their cash as deposits. Those higher costs are being passed along to borrowers, countering the efforts of the People’s Bank of China to reduce lending rates for small- and medium-sized companies in particular. And the bargaining power of money funds is growing — the assets are close to the personal deposits at Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets.“Investors’ risk tolerance has been falling amid weak stock and bond market performances,” so they’ve been turning to money-market funds, said Nie Wen, a Shanghai-based economist at Huabao Trust Co. “The money market funds’ investments may not necessarily end up in the hands of medium and small enterprises.”

It was a lot simpler years ago, when Chinese households had few options other than bank deposits and regulators set the rates on those savings pools. That allowed the PBOC to easily cut funding costs for banks; the central bank also set the lending rate.“While policy makers only needed to focus on the banking system to boost lenders’ willingness to loan, they now face bigger challenges and need more measures to achieve the same goal, given the size of such funds,” said Xia Le, Hong Kong-based chief Asia economist at Banco Bilbao Vizcaya Argentaria SA.The pressure on banks’ loan-creation engine was evident in data last week. New yuan loans in August fell short of forecast. And the aggregate lending figure, including shadow banking, showed borrowers are increasingly having to turn to the debt market. Sales of short-term bills by nonfinancial companies surged to the highest since February 2009. With bond yields on the rise thanks in part to record default rates, borrowers are increasingly stuck.

One sign of the impact of tougher credit conditions came Friday, with data showing the smallest gain in investment spending on record. China could have a new round of supportive measures to stabilize investments, the Economic Information Daily reported on Tuesday, without saying where it got the information. The People’s Bank of China offered no immediate response to a fax seeking comment about the funds’ growth affecting efforts to support loans. Savers have plenty of reason to keep turning to money-market funds, after the Shanghai Composite Index of stocks tumbled into a bear market and bond defaults made credit a risky option. The market expanded 12 percent in July, up 28-fold from 2013, Asset Management Association of China data show. The world’s biggest fund, Yu’EBao, illustrates the challenge for policy makers. It has 62 percent of its 1.45 trillion yuan in bank deposits and 9.4 percent in bonds — mostly sovereign and policy-bank notes, according to the latest report posted on the website of Tianhong Asset Management Co., which manages Yu’EBao.

Limits Imposed

Authorities have appeared to recognize the issue, last year asking Alibaba Group Holding Ltd.’s Ant Financial affiliate, which holds a majority of the Yu’EBao manager, to cut the maximum amount individuals can invest in it. Other funds have taken action more recently, with Harvest Fund Management Co. starting to curb daily aggregate subscriptions for each account from August, after Penghua Fund Management Co. started doing so in July. The main consideration is to ensure healthy development of fund performance and size so that investors’ interest can be protected, according to an emailed reply from Harvest Fund Management when asked about the reasons behind the change. Tianhong and Penghua declined to comment.

“While these products do bring convenience and become good investments for households, the economy hasn’t benefited, and it even brings risks to the financial system,” said BBVA’s Xia. “This has caught regulators’ attention,” and their guidance might be behind the recent curbing measures, he said.

Remember: This is just a sample from a fellow student.

Your time is important. Let us write you an essay from scratch

100% plagiarism free

Sources and citations are provided

Cite this Essay

To export a reference to this article please select a referencing style below:

GradesFixer. (2019). China’s Central Bank. Retrived from https://gradesfixer.com/free-essay-examples/chinas-central-bank/
GradesFixer. "China’s Central Bank." GradesFixer, 27 Aug. 2019, https://gradesfixer.com/free-essay-examples/chinas-central-bank/
GradesFixer, 2019. China’s Central Bank. [online] Available at: <https://gradesfixer.com/free-essay-examples/chinas-central-bank/> [Accessed 15 July 2020].
GradesFixer. China’s Central Bank [Internet]. GradesFixer; 2019 [cited 2019 August 27]. Available from: https://gradesfixer.com/free-essay-examples/chinas-central-bank/
copy to clipboard
close

Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.

    By clicking “Send”, you agree to our Terms of service and Privacy statement. We will occasionally send you account related emails.

    close

    Attention! this essay is not unique. You can get 100% plagiarism FREE essay in 30sec

    Recieve 100% plagiarism-Free paper just for 4.99$ on email
    get unique paper
    *Public papers are open and may contain not unique content
    download public sample
    close

    Sorry, we cannot unicalize this essay. You can order Unique paper and our professionals Rewrite it for you

    close

    Thanks!

    Your essay sample has been sent.

    Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.

    thanks-icon Order now
    boy

    Hi there!

    Are you interested in getting a customized paper?

    Check it out!
    Having trouble finding the perfect essay? We’ve got you covered. Hire a writer

    GradesFixer.com uses cookies. By continuing we’ll assume you board with our cookie policy.