However, some market participants have not clearly identified the relationship between the RMB position resulted from foreign exchange purchases and the central bank’s open market operations. Of course, this is partly due to the insufficient transparency of information, since only monthly data on changes in foreign exchange are available in the market.
For years, the increase in money supply from foreign exchange purchases has been an important factor affecting the central banks decision as to whether to issue central bank bill and the volume of issue. One point worth mentioning is that in China, the issue of stocks is an important factor affecting money market. Actual fund is required to purchase stocks in initial public offerings.