Stocks News
- Fluctuating market 'not macroeconomic problem'
Date: 14-Mar-2007 Sources: (Shenzhen Daily)
RECENT stock market volatility is not a macroeconomic problem and should not lead to any major change in trends, central bank governor Zhou Xiaochuan said yesterday.
'I personally believe this is not a problem on the macroeconomic level and should not lead to any major change in trends,'said Zhou, governor of the People's Bank of China, at a press conference on the sidelines of the annual full session of the Chinese parliament.
Asked whether he agrees that China's 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 one, a market still under construction and in its early years,'said Zhou.
'However, due to 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 Feb. 27, the biggest single-day fall in a decade, which some people said 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 governor said he didn't believe excessive liquidity would have a 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.
Zhou said China would introduce more flexibility to the yuan, which has gained a further 4.7 percent since it was revalued by 2.1 percent in July 2005 and allowed to float in managed bands.
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