China Forex Reserves Swell To Record In July

Reserves in China were expected to reach nearly $100 billion by the end of 1996, against $73.597 billion at the end of 1995, central People's Bank of China governor, Dai Xianglong, was quoted as saying on Saturday.

In a report in the China Securities newspaper, Dai said brisk annual inflation could be tamed at between seven and eight per cent this year, against an official 10 per cent target and 14.8 per cent in 1995, as the economy continued its rapid expansion after recent rate cuts.

The governor, in a positive assessment of the economy at a meeting in Beijing on Friday, said gross domestic product growth might exceed nine per cent in 1996, against an original target of eight per cent.

But he said the central bank would still keep a firm hold on monetary policy despite Thursday's reduction in bank deposit and lending rates by an average of 1.5 and 1.2 percentage points respectively.

Over the next several years, we will still adopt an appropriately tight monetary policy, he said.

Dai said the rate cut was possible because of a sharp fall in consumer prices, which helped drive down the annual inflation rate to 5.8 per cent in July, and said the easing would benefit the management of loss-making state companies.

The debt-to-equity ratio of China's 1,200 big state firms fell to 59 per cent by the end of June, he said.

Previous official estimates have put the average debt-to-equity ratio of state firms at about 70 per cent.

Dai said the problems of the ailing state firms, which are suffering from declining sales and rising stockpiles, were not due to a shortage of money.

Improvement of state firms depended on speeding up their reform and changing their economic structure.