The fluctuating prices on China's fledgling stock market
recently are not a macroeconomic problem and should not lead to any
major change of trends, said the country's central bank governor
here on Monday.
"I personally believe this is not a problem on the macroeconomic
level and should not lead to any major change of trends," said Zhou
Xiaochuan, governor of the People's Bank of China, at a press
conference held on the sidelines of the annual full session of the
Asked whether he agrees that the Shanghai stock market should be
held responsible for triggering the drastic fall of the global
market at the end of February, Zhou made no direct comment but
acknowledged that globalization is making stock markets around the
world more and more "interrelated".
"China used to believe that its (stock) market is a
comparatively small market, a market still under construction and
in its early years, or a newly-established market gradually growing
in a shifting economic system," said Zhou.
"However, due to the development of economic globalization,
there has been a close interrelation of fluctuations on different
stock markets. This tells us that we need to speed up the
development of the Chinese market," he added.
The governor said that China should further increase the ratio
of direct fund raising and step up efforts to make its capital
market "better and more internationalized."
The Shanghai Composite Index fell 8.8 percent to 2,771.79 on
Feb. 27, the biggest single-day percentage fall in a decade, which
some people said had affected markets in the rest of Asia, Europe
and the United States. Market prices had kept fluctuating in the
following trading days.
Zhou also conceded that China is faced with the problem of
excessive liquidity in its financial system, but stressed that
excessive liquidity is a "global phenomenon."
"The same problem is faced by the United States, which has a
huge financial deficit, and those oil-producing countries with a
rich capital reserve," said Zhou.
"All macro-economic regulatory bodies should pay high attention
to this problem and adopt prudent and adequately stringent policies
regarding the excessive liquidity," he added.
But the governor said he didn't believe excessive liquidity
would have direct impact on a specific capital market, including
the stock market and real estate market, on a specific date.
"We shall see that the market is very complicated and there are
a host of reasons for its fluctuation," he said.
(Xinhua News Agency March 12, 2007)