Central Bank of China

PRESS RELEASE Release Date: Nov. 11, 2002




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MONETARY POLICY DECISIONS OF THE BOARD

(Nov. 11, 2002)

The Taiwan economy resumed positive growth early this year and is projected to grow 3.14% for the year as a whole according to the Directorate General of Budget, Accounting and Statistics (DGBAS) of the Executive Yuan. However, the recovery has been primarily driven by export, while a pickup in domestic demand and improvement in employment are yet to be seen. On the financial front, over the recent months M2 monetary aggregate growth has slowed down, and interest rate levels have been higher than in neighboring countries. To boost domestic demand and reflect market rate trends, and with the precondition that prices remained stable, the Central Bank of China (CBC) decided to lower the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral each by 25 basis points from 1.875%, 2.25% and 4.125% to 1.625%, 2.0% and 3.875%, respectively, effective from November 12. In addition, the remunerative rate on banks' reserve accounts with the CBC was reduced from 2.5% to 2.25%, also effective from November 12.

To reinforce the transmission mechanism of rate cuts, the CBC has encouraged banks to commence adjustable rate mortgages (ARMs) and remove the downward rigidity of prime rates since the second half of last year. These structural changes are expected to make banks' lending rates more flexible, align them more closely with market rates, and alleviate the cost of bank capital for the general public.

To help small and medium enterprises (SMEs) obtain financing, the Executive Yuan decided to earmark an additional NT$20 billion to the SME Credit Guarantee Fund within the course of the next two years. This measure is expected to help SMEs raise a total of NT$300 billion in bank credit. As an alternative, the government has recently established a window at the SME One-Stop Solution Center of the Ministry of Economic Affairs, which coordinates the SME Joint Guidance Center and the SME Credit Guarantee Fund to handle SME loan applications unaccepted by banks.

The CBC continued engaging in monetary loosening and relevant measures with an aim to help foster economic stability and growth.

Of all the 15 directors of the Board, 14 consented to the above decisions with 1 unavailable for contact.