LOOSENING UP

M2 growth seen rising above 9% this year

China will further cut the amount of cash that lenders must keep in reserves.

BEIJING: China will further cut the amount of cash that lenders must keep in reserves, and broad M2 money supply growth will accelerate this year, Market News International reported yesterday, citing a source close to the central bank.

The report comes amid growing speculation that China is considering shifting its monetary policy to a looser bias, as the threat of a trade war with the United States adds to worries about an expected slowdown in the world’s second-largest economy in coming months.

The People’s Bank of China (PBoC) last week cut reserve requirement ratios (RRR) for most banks, hours after the statistics bureau reported softer-than-expected industrial output and investment growth for March, suggesting economic momentum may already be starting to slow.

“The unexpected RRR cut is unlikely to be its last given the growing concerns about a possible trade war with the United States,’’ economists told Reuters.

The PBoC has reiterated that its “prudent and neutral” policy stance remains unchanged.

The central bank did not immediately respond to a faxed request for comment yesterday.

“China will strive hard to achieve this year’s economic targets,’’ the politburo, a top decision-making body of the ruling Communist Party, said on Monday after a meeting, according to state media.

The 25-member politburo added that China would boost domestic demand to ensure the stability of the economy.

The politburo also said China would deepen supply-side structural reforms and overcapacity cuts in a lawful and market-based way, Xinhua reported.

China’s stock markets posted their strongest gains in two months yesterday following the comments, as investors bet authorities may adopt more growthboosting measures if exports start to falter.

“In general, we think the meeting may be signalling an easing bias in policy stance,” Goldman Sachs wrote in a note.

“This slight easing bias may be stemming from perceived risks related to the trade tensions and possibly weaker-thanexpected data on activity, inflation and money and credit in March.”

Policymakers are walking a fine line by containing riskier types of financing and slowing an explosive build-up in debt without stunting economic growth.

While China’s official data suggests economic growth has been remarkably steady at 6.8-6.9% over the past year, Capital Economics estimated last week that growth peaked in July at 6.6% and slowed to 4.8% at the start of 2018 as policy tightened.

The regulatory clampdown, now in its second year, has also slowly pushed up companies’ borrowing costs and mortgage rates.

M2 growth — one measure of credit conditions — has moderated in recent months, evidence that the government’s “de-risking” and “deleveraging” campaign is working, according to the central bank.

M2 rose 8.2% in March from a year earlier, slower than the 8.8% pace in February and the 8.6% expansion in January.

M2 expanded 8.2% last year, the slowest pace since records began in 1996.

But M2 growth is seen rising above 9% this year, MNI reported, citing the source, whom it did not identify.