BIZCHINA / Statistics
M2 growth slows as measures kick in
By Zheng Lifei (China Daily)
Updated: 2006-10-14 09:10
Money supply and lending growth continued their downward spiral in
September, a sign that the government's tight monetary measures are
working.
The broad M2 money supply, which covers cash in circulation and deposits,
grew 16.83 per cent in September from a year earlier, down from a 17.9
per cent growth in the previous month, according to figures released by
the central bank on Friday.
It was up 18.4 per cent in July from a year earlier.
Local currency loans climbed 15.23 per cent last month from a year
earlier, continuing a decrease in the growth rate in the last two months.
They grew 16.3 per cent in July, slowing slightly to 16.1 per cent in
August.
"Both money supply and lending growth slowed in the third quarter,
indicating that the macro controls in the financial field are taking
effect," the People's Bank of China said in a report.
The central bank has twice raised banks' reserve ratio requirements. The
money commercial banks are required to deposit in the central bank to
curb their lending capacity and interest rates this year.
In addition, the central bank has issued a series of administrative
directives and used "window guidance" to restrain banks from loose
lending.
The new figures may mean the possibility of further tightening reforms is
becoming more remote at least in the short term, said economists.
"Slower money and credit growth in September confirms that the near-term
risks of further policy tightening have been reduced," the Hong Kong
branch of investment bank Goldman Sachs said in a note to its clients.
The bank also downplayed concerns over the slowing money supply and loan
growth's impact on economic growth.
"We do not take the softer money and credit data as indicating risks to
growth, given the buoyant performance of the domestic equity market and
lower market interest rates," said the bank.
Fuelled by the swelling foreign trade surplus and inflow of foreign
investment, China's foreign exchange reserves, already the world's
largest, soared by US$46.8 billion in the third quarter of 2006, reaching
US$987.9 billion, the central bank said on Friday.
They had increased by US$66 billion in the second quarter and US$56.2
billion in the first quarter.
China's foreign trade surplus hit US$15.3 billion in September, the
second highest monthly record in the first three quarters, according to
statistics released by the General Administration of Customs.
The ballooning foreign exchange reserves have taken the blame for the
growth of money supply, with the central bank issuing extra additional
money to mop up the excess US dollars in the market, resulting in
excessive liquidity in the banking system.
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