The People's Bank of China, thecountry's central bank, describes ina report that the country's financialsituation is stable \"in general\", the risks leftover from the past have been dealt with, anda financial stability mechanism is cominginto being.
According to its first report on thecountry's financial stability, the central banksaid China needs to pay special attention to10 major problems facing the country inorder to maintain financial stability.
\"Financial stability\" refers to the situa-tion in which the financial system is capableof playing its key roles effectively, accord-ing to the report.
Transforming its economic growthmode was listed as the first of the 10 issues.
China's inefficient use of raw materi-als and energy in the past decades has beenblamed for the country's shortage of keyraw materials and energy and rising priceson both domestic and overseas markets.
Citing examples of the financial turmoilthat hit Mexico, Thailand, Russia, Brazil inlate 20th century, the report said financialstability concerns political, economic andsocial stability, and China must pay closeattention to the existing problems in its fi-nancial system to prevent financial risks andpush forward financial reform.
Other issues listed by the report includecoordinated development of direct and in-direct financing, hidden fiscal deficits, con-trol and liberalization of capital prices, im-provement of the corporate governance offinancial institutions,risk supervision andcontrol of overlapped financial services,andthe impact of economic and financialglobalization.
The report said hidden fiscal deficitscaused by a lack of funding for social secu-rity and debts of local governments mayaffect financial stability.
As China is in the process of improv-ing its mechanism to form interest rates andexchange rates, both the corporate worldand residents should adapt themselves to thechanging environment, which is character-ized by liberalization, said the report.
The report also called on the corporateworld and residents to learn how to recog-nize and deal with risks involving the inter-est and exchange rates.
The central bank voiced its concernsover the uncertainty brought by the\"overflowing\"effectiveness of economicand financial globalization on China's fi-nancial stability.
Facing many uncontrollable factors,such as soaring oil prices and interest ratehikes, the depreciation of the US dollar, in-ternational disputes and even wars, China'sfinancial stability is coming under growinginfluence from the international economicand financial environment, noted the report.
Coupled with the benefits from China'sgrowing integration into the world'sproduction, trading and capital system is theincreased uncertainty and risks arising fromglobalization, it said.
China will establish its financial stabil-ity index system and early-warning systemand improve its monitor and evaluationmethods in the vulnerability of its financialsystem in a bid to set up a rapid-reactionmechanism for financial risks of differentkinds and scales.
Aside from its annual report and a re-port on the implementation of monetarypolicies, the central bank said it will pub-lish such reports every year.