Central Bank of China

PRESS RELEASE Release Date: November 7, 2001




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Monetary Policy Decisions of the Board Meeting

(November 7, 2001)

The Board of the Central Bank of China (CBC) decided today to lower the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral each by 25 basis points to 2.25%, 2.625% and 4.50%, respectively, effective from November 8. Today's decision is made to boost the sagging economic sentiment, taking into account the markedly declining demand from the external sector and the stable domestic prices. The CBC encourages banks again to slash their lending rates in line with the lower cost of funds and to extend credit to the corporations so as to facilitate business activities.

To reduce banks' cost of foreign currency funds, the CBC also lowered the marginal required reserve ratio on foreign currency deposits (those made since December 8, 2000) to 2.5% from 5%, effective from November 8.

Over the recent months, some financial institutions have been more unwilling to lend. In order to help small and medium businesses obtain needed capital, the CBC and Ministry of Finance have jointly mobilized the Small and Medium Business Credit Guarantee Fund (SMBCGF) to further carry out its credit guarantee scheme.

The SMBCGF has simplified guarantee procedures and raised guarantee coverage. In addition, to expand the SMBCGF's guarantee capability, the Executive Yuan(Cabinet) has budgeted NT$5.5 billion for the Fund in this year. The Bankers Association has also agreed to donate NT$1.5 billion to the Fund in each of the three following years. The outstanding guarantee liabilities increased from NT$135.8 billion at the end of this March to NT$141.9 billion at the end of this October.