Central Bank of China

PRESS RELEASE Release Date: January 25, 2002




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Financial Conditions (December 2001)

Monetary Aggregates For the month of December 2001, the annual growth rates of the monetary aggregates M1A, M1B and M2, measured on a daily average basis, were 0.07%, 10.72%, and 4.73%, respectively. M1A and M1B growth continued to rise from the figures recorded in the previous month, mainly attributed to the robust transactions in the stock market and a shift of time deposits and foreign currency deposits to demand deposits as a result of a narrowed interest spread between time deposits and demand deposits. However, M2 growth went down mainly due to the higher base of the corresponding month of the previous year, and the decrease in foreign capital inflows. For the year as a whole, M2 exhibited an average annual growth rate of 5.79%, which was within the target range (5 % to 10%).

Deposits and Loans & Investments At the end of December, the annual growth rate of total deposits in major financial institutions, including monetary institutions and the Postal Savings System, declined to 4.40% from 4.78% at the end of November, mainly owing to the higher base of the corresponding month of the previous year. However, the annual growth rate of total loans and investments moved upward from -1.44% in November to -1.04%, largely because of the increasing demand for margin credit for purchasing stocks as a result of the rising stock market, as well as banks' policies to promote loans with the approach of the banks' settlement day at the year-end. If loans and investments extended by life insurance companies and investment and trust companies, major financial institutions' reclassifying nonaccrual loans and writing-off bad loans, as well as funds raised directly from financial markets were taken into account, the total funds raised by non-financial sectors showed an annual growth rate of 2.73% for the month.

Call-loan Rate and Reserve Conditions In spite of the Treasury's borrowing from banks, the issues of Treasury bills, as well as the placement of tax and earnings of government-owned enterprises in the Treasury account with the Bank, the average overnight call-loan rate for the month continued to trend downward from 2.486% in November to 2.389%. This was mostly influenced by banks' easy fund conditions, which resulted from the interest payment on government bonds, the remuneration on required reserves and the veterans' pension disbursements, as well as the Bank lowering both the discount rate and the rate on accommodations by 12.5 basis points on December 28. For the month as a whole, the average free reserves of depository institutions and the Postal Savings System were NT$ 4.5 billion.

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