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Markets want more Transparent PBOC

After a week that saw short term interest rates spike to as high as 25 percent for some banks, investors around the world are calling for The People’s Bank of China, (PBOC) the country’s central bank, to become more transparent.

For those who watch the PBOC, they know that the bank has some strange operating policies. Not only will it sometimes announce rate changes without warning and without explanation, it makes the announcements at times like late Friday or early Saturday–times when most market watchers aren’t working. Recent Chinese data, which was less than impressive, was announced while most Americans were asleep on Saturday morning.

This week, as short-term interest rates continued to climb, the PBOC refused to inject liquidity into the market to keep rates under control–a policy that it had longed touted as a top priority. Why it refused to bring the brewing crisis under control was not explained by the bank although some believe it was to force banks to stop pushing money through the little-known “shadow banking” system. Authorities worry that it causes outsized credit risks.

Unlike the U.S. Federal Reserve or the European Central Bank, the PBOC doesn’t hold question and answer sessions with the media and it doesn’t hold regularly scheduled meetings to make policy decisions. But unlike other central banks, the PBOC isn’t independent of the government. Any major decision has to gain the approval of the cabinet.

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