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In a recent exclusive interview with People's Daily, Mr. Zhou Xiaochuan, Governor of China's central bank, unraveled all pending questions concerning the multifaceted financial life in China's economy.

Zhou first rejected the view that the money supply was too tight. As it takes time to have a policy take effect, he believed that the money supply was generally appropriate, which would be felt soon. And the so-called tight liquidity in some regions and enterprises, in his opinion, was actually caused by their big budget projects and inflated inventories. He acknowledged there was problem in the structure of the money supply.

In his definition of this year's "prudential monetary policy", he shows great concern on the prevention of both the inflation and systematic financial risks.

Although he stressed the price tools in achieving that, he denied the speculation on any "cycle of interest rate hike" or even any "business cycle" in real sense. He reminded the public of the fact that the interest rate is not necessarily always "positive". He thinks the present interest rates are still too high and the investment channels beyond banks are to be further exploited.

He is trying to correct the misunderstanding of consumers that the mortgage rates are always "favorable". But he made it clear that the recent rise of mortgage rates was a strong signal to banks, rather than home buyers, on the risks of credit.

He noted that the housing market would not be immune from the future adjustment of the benchmark interest rate which would take place "if necessary". But he recognized the complexity of making such decisions as economic indices give mixed indication.

He confirmed that the Bank of China (BoC) and the Construction Bank of China had "basically" eligible for listing at the capital market, despite of the scandals overshadowing them. He disclosed that the financial restructuring plan of the Industrial Bank of Bank had submitted to the State Council.

He excluded the possibility of further steps to liberate the interest rate system in the foreseeable future. He stressed that the existing two limits on the minimum interest rate for loans and the ceiling interest rates for deposits would be there for a considerably long period to follow until commercial banks were able to price their interest rate rationally.

When it comes to the exchange rate of the Chinese currency, Zhou noted that, given the country's present balance of its international payment, the future efforts would be made more on having a perfect mechanism in place for the formation of RMB exchange rate, rather than revaluing the currency.

Finally, Zhou introduced the concept of financial ecology he repeated several times recently. He said the legal framework, reform of enterprises, the social credit system, the improvement of the information disclosure and services were all necessary to build the financial ecological environment. He particularly mentioned the significance of the bankruptcy law.

He concluded that the expected "chemical changes" in the financial ecological environment would neither take place very quickly nor be possible without "chemical changes" both within and out of the financial institutions.

Full text of Zhou's interview will be available by People's Daily Online.