In the first two months of 2006, a total of 825 billion yuan worth of central bank bills was issued with 2.4 trillion as outstanding at end February. Given the limited financing channels and CAR’s restraint on business expansion of commercial banks, central bank bills became a good investment choice.
But if situation changes, especially when more choices are available for investment by commercial banks and when they are more willing to lend, central bank bills will not be so well received. Between 2004 and 2005, stateowned commercial bank reform tackled the most difficult problems. Because of strict requirements including CAR, commercial banks became more prudent in lending.