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Chinese Central Bank Appoints HSBC as a Primary Dealer

The Shanghai branch of HSBC Holdings, Europe's largest bank, has been appointed a primary dealer in China's central bank's open market operations, the first foreign bank to be selected.

China International Capital, the country's first joint venture investment bank with Morgan Stanley and Ping An Insurance were also selected for the first time, according to a central bank statement on Friday.

"In line with an appraisal of open market operations' primary dealers and demand of monetary policies, the number of primary dealers will continue to be 52 in 2007 and is announced herewith," the People's Bank of China said in the statement.

Primary dealers appointed in 2006 but excluded from the 2007 list included major brokerage Shenyin & Wanguo Securities and China Pacific Insurance, the country's second-largest general insurer.

Primary dealers can directly trade with the central bank in its bill issuance and repurchase business, and thus can get first-hand information on Beijing's monetary policy trends.

China's central bank began open market operations in 1996, but it was not until 2003 that it began regular operations -- issuing bills and conducting repo business to help adjust China's money supply.