Important English Vocabulary from “The Economist”-(Day-16):
Dear Readers, to score good marks in English Section first and for most thing is you need to develop your reading skills, while reading a passage you need to highlight the tough words in it and you should know the correct meaning for those words. This will help you understand the passage clearly and also you can learn more new words, it means also you can develop your vocabulary. To help you in this part we have provided a passage along with meaning, synonyms and usages of hard words in the passage, make use of it.
China modernises its monetary policy
With a little imperial inspiration, China shifts to a more market-based interest-rate system.
QIN SHIHUANG was the emperor who first unified China, through bloody conquest more than two millennia ago. Known for starting the Great Wall and burying scholars alive, he has a new claim to fame: the central bank has drawn on his construction of a national road system to help explain its new monetary system. In a report on August 11th, the People’s Bank of China seized on an idiom derived from his road-building experience: it had “shaved off mountain peaks and filled valleys” in managing liquidity.
The modernisation of monetary policy is in its own way a monumental project for China. Over the past two decades, the central bank’s conduct of policy had two defining features. It focused on the quantity, not the price, of money. And it relied on inflows of foreign cash to generate new money. Both features are now slowly changing, bringing China closer to the norm in developed markets, an essential transition for an increasingly complex economy.
Start with interest rates. These used to be of secondary importance in China. Regulators instead used quotas to dictate how much banks lent and in effect fixed their deposit and lending rates. This made sense when China was in the early stages of moving away from a planned economy. Crude targets were still needed. But as a bigger, rowdier financial system took shape, these targets became less relevant. With the emergence of a large bond market, myriad non-bank lenders and new investment options for savers, banks now face more competition for deposits and in building up their loan books.
Seeing this, the central bank in late 2015 gave banks freedom, in theory, to set their own lending and deposit rates. It also eliminated mandatory loan-to-deposit ratios and put less stress on credit quotas. However, this opened a gap. It had relinquished its former controls without new ones in place. The answer has been to create a policy rate, much like benchmark short-term interest rates in America and Europe. The central bank has tried to create an equivalent anchor in China’s financial system: the seven-day “repo” rate (the bond-repurchase rate at which it lends to banks).
To do so it has established a band around the seven-day rate, with a lower bound for lending to banks flush with cash and an upper bound for those in need. To cap rates at the upper bound, the central bank also started accepting a wider array of collateral. Since mid-2015 this has worked. The central bank has kept the seven-day rate within the corridor and nudged it up as the economy has gathered pace. On August 15th, in its annual review of China’s economy, the IMF passed a tentative verdict: “The conduct of monetary policy increasingly resembles a standard interest-rate-based framework.”
Complementing this shift has been the central bank’s creation of a range of liquidity-management tools. Since 2013 it has opened a baffling plethora of new lending windows: short-term liquidity operations, standing lending facilities, medium-term lending facilities and pledged supplementary lending. All added up to the same thing: conduits to inject cash at different rates and for different durations or, by letting them expire, to withdraw cash.
Their importance has been clear over the past two years as capital outflows eroded the value of China’s foreign-exchange reserves. This placed pressure on domestic liquidity, since China had relied on cash inflows to generate money growth (issuing new yuan to buy up the dollars streaming in). After initial hiccups, the central bank more than made up for the loss of dollars at home by using its various tools. As a result, it has been better able to manage cash levels on a daily basis. High volatility in money-market rates, once a regular occurrence, has all but vanished, hence the central bank’s conceit that, in a Qin-like manner, it has shaved off mountain peaks and filled valleys.
Nevertheless, both policy shifts are works in progress. With state-owned banks and companies still counting on government support in the event of trouble, interest rates have less signalling value than in a freer market. The central bank, for its part, continues to use administrative controls to influence lenders. And its success in managing liquidity has been greatly helped by China’s tightened grip on its capital account over the past year. Without that, money growth at home might have fuelled more capital outflows. It is, in other words, a gradual approach to reform, in which sense the invocation of China’s first emperor is unfortunate. His rule was transformative but violent and short-lived. Slower monetary-policy shifts, in contrast, have much to recommend them.
Source: The Economist
1). Imperial (Adj)
Definition: relating to an empire.
Synonyms: royal, regal, monarchal, monarchial, monarchical
Usage: The symbol figured on the imperial banners.
2). Unify (Verb) past tense: unified; past participle: unified
Definition: make or become united, uniform, or whole.
Synonyms: unite, bring together, join (together), merge, fuse, amalgamate
Usage: He unified the confederacy into a powerful entity.
3). Millennium (Noun) plural noun: millennia
Definition: a period of a thousand years, especially when calculated from the traditional date of the birth of Christ.
Usage: Silver first came into use on a substantial scale during the 3rd millennium BC.
4). Seize (verb) past tense: seized; past participle: seized
Definition: take hold of suddenly and forcibly.
Synonyms: grab, grasp, snatch, seize hold of, grab hold of, take hold of, lay hold of
Usage: A protester seized the microphone.
5). Derive (Verb) past tense: derived; past participle: derived
Definition: obtain something from (a specified source).
Synonyms: obtain, get, take, gain, acquire, procure, extract
Usage: He hated the work, only deriving consolation from his reading of poetry.
6). Dictate (Verb)
Definition: state or order authoritatively.
Synonyms: give orders to, order about/around, boss (about/around), impose one’s will on
Usage: My daughter is always dictating to her friends.
7). Crude (Adj)
Definition: in a natural or raw state; not yet processed or refined.
Synonyms: unrefined, unpurified, unprocessed, untreated; unmilled
Usage: They convert crude oil into petroleum.
8). Myriad (Noun)
Definition: a countless or extremely great number of people or things.
Synonyms: multitude, a large/great number/quantity, a lot, scores, quantities
Usage: Myriads of insects danced around the light above my head.
9). Relinquish (Verb) past tense: relinquished; past participle: relinquished
Definition: voluntarily cease to keep or claim; give up.
Synonyms: renounce, give up, part with, give away; hand over
Usage: He relinquished control of the company to his sons.
10). Collateral (Noun)
Definition: something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Synonyms: security, surety, guarantee, guaranty, pledge, bond
Usage: She put up her house as collateral for the bank loan.
11). Nudged (Verb)
Definition: prod (someone) gently with one’s elbow in order to attract attention.
Synonyms: poke, elbow, dig
Usage: People were nudging each other and pointing at me.
12). Verdict (Noun)
Definition: a decision on an issue of fact in a civil or criminal case or an inquest.
Synonyms: judgement, adjudication, adjudgement, decision
Usage: The coroner recorded a verdict of death by misadventure.
13). Baffling (Adj)
Definition: impossible to understand; perplexing.
Usage: The crime is a baffling mystery for the police.
14). Plethora (Noun)
Definition: a large or excessive amount of something.
Usage: A plethora of committees and subcommittees.
15). Conduit (Noun)
Definition: a channel for conveying water or other fluid.
Synonyms: channel, duct, pipe, tube, gutter, groove
Usage: Spring water ran down a conduit into the brewery.
16). Eroded (Verb)
Definition: gradually destroy or be gradually destroyed.
Synonyms: wear away/down, abrade, scrape away, grind down, crumble, dissolve
Usage: The soil has been eroded by the rainwater.
17). Hiccups (Noun)
Definition: an involuntary spasm of the diaphragm and respiratory organs, with a sudden closure of the glottis and a characteristic gulping sound.
Usage: Then she got hiccups.
18). Conceit (Noun)
Definition: excessive pride in oneself.
Synonyms: vanity, narcissism, conceitedness, self-love, self-admiration
Usage: Polly’s eyes widened at his extraordinary conceit.
19). Invocation (Noun)
Definition: the action of invoking someone or something.
Synonyms: citation, mention, acknowledgement, calling on; appeal to
Usage: Her invocation of themes favoured by the grass-roots supporters.
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