Growth of the money sup­ply slows in De­cem­ber

China Daily European Weekly - - Business - By CHEN JIA chen­jia@chi­

Growth of China’s money sup­ply shrank to the year’s slow­est level in De­cem­ber, the re­sult of the coun­try’s tight­ened fi­nan­cial reg­u­la­tion and delever­ag­ing process, but an­a­lysts said the money sup­ply sit­u­a­tion will im­prove this year.

The broad mea­sure of money sup­ply, or M2, which cov­ers cash in cir­cu­la­tion and all de­posits, had risen by 8.2 per­cent year-onyear by the end of De­cem­ber — the slow­est pace in his­tory, ac­cord­ing to data re­leased by the cen­tral bank on Jan 12. It was 3.1 per­cent­age points lower than the fig­ure for that pe­riod in 2016. The fig­ure was 9.1 per­cent in Novem­ber and 8.8 per­cent in Oc­to­ber.

Last month, banks’ new yuan lend­ing, an­other mea­sure of mar­ket liq­uid­ity, dropped sharply to 584.4 bil­lion yuan ($90.4 bil­lion; 74.3 bil­lion eu­ros; £65.9 bil­lion), the slow­est monthly growth since April 2016, down from 1.12 tril­lion yuan in Novem­ber, ac­cord­ing to the Peo­ple’s Bank of China, the cen­tral bank.

The PBOC also re­leased data on to­tal so­cial fi­nanc­ing, a broad mea­sure of credit and liq­uid­ity in the econ­omy, in­clud­ing off-bal­ance-sheet forms of fi­nanc­ing that ex­ist out­side the con­ven­tional bank lend­ing sys­tem. The TSF de­creased to 1.14 tril­lion yuan in De­cem­ber, com­pared with 1.60 tril­lion yuan in Novem­ber.

Ruan Jian­hong, head of the cen­tral bank’s sur­veys and sta­tis­tics depart­ment, said at a news con­fer­ence on Jan 12 that the slow­down of money sup­ply was a re­sult of the coun­try’s delever­ag­ing process in the fi­nan­cial sec­tor, as many com­mer­cial banks re­cently curbed the ex­pan­sion of off-bal­ance-sheet prod­ucts, a main part of the “shadow bank­ing” busi­ness.

It is also a re­sult of the mon­e­tary au­thor­ity’s con­tin­ued pru­dent and neu­tral mon­e­tary pol­icy stance, as well as tight­ened fi­nan­cial reg­u­la­tion, said Ruan.

“A rel­a­tively lower M2 may be­come a new nor­mal” along with the deep­en­ing of delever­ag­ing, and the fi­nan­cial sec­tor will bet­ter serve real eco­nomic de­vel­op­ment, the PBOC of­fi­cial said.

The coun­try’s fi­nan­cial reg­u­la­tors have taken a se­ries of mea­sures to push for­ward the delever­ag­ing of fi­nan­cial in­sti­tu­tions across the board, in­clud­ing tight­en­ing trad­ing rules for bonds, ne­go­tiable cer­tifi­cates of de­posit and en­trusted loans, as well as as­set and wealth man­age­ment prod­ucts, aim­ing to pre­vent sys­temic fi­nan­cial risks.

The Bank of Com­mu­ni­ca­tions said ear­lier this month that China’s M2 growth would rise by 10 per­cent this year.

Sheng Songcheng, a former cen­tral bank of­fi­cial, said in late Oc­to­ber that China’s M2 growth might ex­ceed 10 per­cent this year.

Liang Hong, chief econ­o­mist with China In­ter­na­tional Cap­i­tal Corp, says that “loan is­suance may also sur­prise on the up­side in Jan­uary and Fe­bru­ary, driven by re­cov­ered de­mand for man­u­fac­tur­ing in­vest­ment and the still-re­silient de­mand for in­fra­struc­ture and mort­gage fi­nanc­ing”.

“It is likely that pol­i­cy­mak­ers in China will grow more con­fi­dent about growth and rel­a­tively more ‘ hawk­ish’ in mon­e­tary pol­icy con­duct af­ter March,” she says.

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