M2 growth at record low

China Daily - - BUSINESS - By CHEN JIA chen­jia@chi­nadaily.com.cn

The growth of China’s broad money sup­ply or M2 slowed to a record-low of 8.9 per­cent in Au­gust, in­di­cat­ing a tight­en­ing reg­u­la­tion on off-bal­ance sheet fi­nanc­ing, aimed at pre­vent­ing sys­temic risk, ac­cord­ing to the cen­tral bank.

The fig­ure re­leased on Fri­day was much lower than the mar­ket’s ex­pec­ta­tion of 9.1 per­cent, down from July’s 9.2 per­cent. The growth rate has eased for seven straight months.

The Peo­ple’s Bank of China, the cen­tral bank, also re­leased the amount of new ren­minbi loans in Au­gust, which surged to 1.09 tril­lion yuan ($166.72 bil­lion) from 825.5 bil­lion yuan in July, and was larger than the ex­pected vol­ume of around 950 bil­lion yuan.

The stronger growth of ren­minbi loans went against a fast slow­down of M2 growth to some ex­tent, in­di­cat­ing a new phe­nom­e­non that has been seen since the sec­ond quar­ter. It re­flects the fact that more credit has been chan­neled to sup­port the real econ­omy while re­strain­ing ex­pan­sion of “shadow bank­ing”, as ex­perts call it.

Shen Jian­guang, chief China econ­o­mist at Mizuho Se­cu­ri­ties, said that com­mer­cial banks have in­creased lend­ing shown on their bal­ance sheets, which sta­bi­lized eco­nomic growth last month.

The data, is­sued by the Na­tional Bu­reau of Sta­tis­tics on Thurs­day, in­di­cated a slight slow­down of in­dus­trial out­put and fixed-as­set in­vest­ment, mainly be­cause of en­ergy con­ser­va­tion and emis­sion re­duc­tion poli­cies. But it still re­mained a strong growth mo­men­tum, Shen said.

Tight­en­ing reg­u­la­tions on banks’ wealth man­age­ment prod­ucts, es­pe­cially those trad­ing in the in­ter­bank mar­ket, have slowed the M2 ex­pan­sion rate, he ex­plained, fol­low­ing the Na­tional Fi­nance Work­ing Con­fer­ence’s em­pha­sis on fi­nan­cial delever­ag­ing and controls on risks.

In Au­gust, the to­tal so­cial fi­nanc­ing amounted to a higher-than-ex­pected 1.48 tril­lion yuan, 18.6 bil­lion yuan more than a year ear­lier, ac­cord­ing to the cen­tral bank.

A sur­vey of Chi­nese banks re­leased by PBOC on Fri­day showed that their con­fi­dence in the macroe­con­omy has strength­ened, re­flected by an in­dex at 75.3 per­cent in the third quar­ter, up from 67.8 per­cent in the April-to-June pe­riod.

It also re­leased the out­stand­ing po­si­tion for for­eign ex­change pur­chase of 21.5 tril­lion yuan, down by 821 mil­lion yuan com­pared with July, the 22nd straight monthly drop. This is pos­si­bly re­lated to the slower M2 growth and more at­ten­tion be­ing paid to mar­ket liq­uid­ity in the near term, said Cao Yuanzheng, chair­man of the Bank of China In­ter­na­tional Re­search Cen­ter.

To cut the cash amount, that’s re­quired to be re­served by com­mer­cial banks, now may be a choice for the mone­tary author­ity to man­age liq­uid­ity, he said.

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