Analysts said the in-camera meeting comes at a time when China is recording a high trade surplus of $177.47 billion, huge foreign exchange reserves that exceed $1 trillion, besides stagnant domestic consumption and the possibility of a slowdown in the world economy. These issues have formed a labyrinth rife with tricks and traps. A surging trade surplus will force the central bank to buy back foreign currencies with the yuan, which will increase the foreign exchange supply. To absorb liquidity, the central bank will have to raise central interest rates to raise the cost of loans. However, this will encourage saving, thus further dampening consumption. Citing sources, China Business News recently reported that the Peoples Bank of China, the ministry of finance, the banking regulatory commission, and other authorities had each prepared separate reports based on field research.
The reports, to be presented to top leaders, including Premier Wen Jiabao, will cover financial supervision, rural reform, foreign exchange management, state-owned financial assets control, development of the capital market, opening-up of financing sector, reform of state-owned banks, corporate governance and the development of insurance industry, it said.