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SteelOrbis Shanghai According to the monthly report published on January 15 by the Chinese central bank (People’s Bank of China), the bank achieved remarkable progress in 2006 by carrying out sound monetary policies and exerting the necessary control over the total money supply. However, some key figures presented here below show that there is still a great challenge ahead as regards financial macro-control in 2007. By the end of December 2006, broad money supply (M2) had risen 16.94 percent year on year to RMB 34.56 trillion ($4.44 trillion), down 0.63 of a percentage point in growth compared with the end of the previous year, but still much higher than the projected 15 percent increase. By the end of December, the total deposit balances of China’s financial institutions had reached RMB 34.8 trillion ($4.47 trillion), up 15.94 percent year on year. Meanwhile, the excess reserve ratio of China’s financial institutions had reached 4.78 percent, up two percentage points month on month and up 0.57 of a percentage point year on year. Last year, the People’s Bank of China (PBOC) raised the deposit reserve rate three separate times. However, the excess reserve ratio continued at a high level. Thus, it is expected that the PBOC will continue to hike the reserve rate, and will also most likely increase interest rates. By the end of December, the combined total loans issued by China’s financial institutions had reached RMB 22.53 trillion ($2.9 trillion), up 15.07 percent. This growth was up 2.09 percentage points year on year. The increase in loans directly contributes to China’s economic growth, which is also an important factor in the strong performance of the Chinese steel market. In December, the weighted average interest rate for inter-bank lending was 2.25 percent, down 0.8 of a percentage point month on month, but up 0.53 of a percentage point compared with the end of the previous year. The overall 2006 interest rate for inter-bank lending was above the 2005 level. By the end of December 2006, China’s foreign exchange reserve totaled $1.0663 trillion, up 30.22 percent year on year. This growth was down four percentage points compared with the end of the previous year. The RMB/USD rate reached 7.8087 by the end of December.