Growth in money sup­ply scaled down

Cen­tral bank: Econ­omy’s needs met dur­ing delever­ag­ing

China Daily (Hong Kong) - - FRONT PAGE - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

Growth in a broad mea­sure­ment of China’s money sup­ply dropped to a record low in June as reg­u­la­tors worked to re­duce lever­age in the na­tion’s econ­omy.

The M2 money sup­ply grew 9.4 per­cent from a year ear­lier, after a 9.6 per­cent growth rate in May, which also was a record low, ac­cord­ing to data from the Peo­ple’s Bank of China. That is com­pared with a 12 per­cent tar­get for the broad money sup­ply for the whole year.

But not too much should be read into the slower growth of money sup­ply be­cause credit grew at a proper level to sup­port eco­nomic ac­tiv­i­ties, Ruan Jian­hong, head of the Sur­vey and Sta­tis­tics Depart­ment of the cen­tral bank, said on Wed­nes­day.

Ruan said the change is a nat­u­ral re­sult of delever­ag­ing in the fi­nan­cial sec­tor.

The cen­tral bank has vowed to con­tain fi­nan­cial lever­age, fend­ing off fi­nan­cial risks in­volved in key ar­eas such as shadow bank­ing and real es­tate fi­nanc­ing.

The money sup­ply growth change is no sur­prise, ac­cord­ing to Li Chao, chief econ­o­mist with Bei­jing-based Hu­atai Se­cu­ri­ties. The cen­tral bank sent sig­nals to the mar­ket of its in­ten­tion to en­hance su­per­vi­sion ear­lier in May, eas­ing mar­ket ten­sions through in­ject­ing liq­uid­ity, Li said.

Debt re­duc­tion in the fi­nan­cial sec­tor has not im­pacted eco­nomic ac­tiv­i­ties, Ruan said. “The fi­nanc­ing de­mand in the non­fi­nan­cial sec­tor has been met prop­erly,” Ruan said.

M2 in­cludes cash, liq­uid ac­counts and other ac­counts in­clud­ing sav­ings de­posits and some se­cu­ri­ties. In the non­fi­nan­cial sec­tor, M2 in­creased by 10.2 per­cent year-on-year in June, which is 0.8 per­cent­age points higher than the over­all growth of the M2 sup­ply.

The fi­nan­cial sec­tor has con­tin­ued to sup­port eco­nomic ac­tiv­i­ties, “es­pe­cially to sec­tors that have be­come new growth en­gines,” Ruan said.

There has been con­sid­er­able growth in medium- to long-term loans is­sued to sec­tors that make a high con­tri­bu­tion to growth. In the first half of this year, credit is­sued to the high­tech man­u­fac­tur­ing sec­tor grew at a higher rate than the av­er­age for man­u­fac­tur­ing, ac­cord­ing to the cen­tral bank.

Sup­ported by the con­tin­ued ad­vance of new growth driv­ers, the Chi­nese econ­omy ended in a strong po­si­tion in the first half this year.

The econ­omy is not likely to lose its growth mo­men­tum in the sec­ond half, ei­ther, said Gao Huiqing, head of the de­vel­op­ment re­search depart­ment of the State In­for­ma­tion Cen­ter.

Gao said it “might be a good i dea” to quicken delever­ag­ing a lit­tle while sta­bi­liz­ing growth “is not the top task for the gov­ern­ment”.

“It will be a longterm cam­paign to defuse the sys­temic fi­nan­cial risks and it might take years to fin­ish. The pace needs to be con­trolled prop­erly so that it will not hurt ec o n o m i c gr o w t h ,” h e added.

It will be a longterm cam­paign to defuse the sys­temic fi­nan­cial risks.”

Gao Huiqing, head of the de­vel­op­ment re­search depart­ment of the State In­for­ma­tion Cen­ter

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