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April money supply grows 15.3%, slowest in 29 months
By Zhang Fengming |
May 11, 2011, Wednesday
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Online Edition
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CHINA'S money supply slowed down in April to follow the central bank's tightening measures.
M2, the broadest measure of money supply, grew a slower-than-expected 15.3 percent in April -- the slowest pace in 29 months, the People's Bank of China data showed today.
Chinese banks extended 739.6 billion yuan (US$113.9 billion) of new yuan loans in April, down 20.8 billion yuan from a year ago, but higher than March's 679.4 billion yuan.
"Both M2 and loan growth further moderated in April, consistent with the policy to control liquidity and with our expectation," said Cui Li, a Royal Bank of Scotland economist.
Though the bank data showed a slowdown of economic activities, other April economic indicators, including a higher-than-expected inflation and a surge in trade, showed China's economy still has a upside risk, economists said.
The Consumer Price Index, the main gauge of inflation, moderated slightly to 5.3 percent year on year from March's 5.4 percent but was still the second highest monthly reading in the past two years.
"In light of sustained inflation pressure, we maintain our call for another interest rate hike in the second quarter," Cui said. "We also expect the currency to continue its gradual climb at a 4 percent annualized rate and believe the softening in the Producer Price Index has reduced the pressure on yuan's rapid appreciation to counter the rise in import costs."
China's PPI rose 6.8 percent in April, down 0.5 percentage points from March.
Liu Ligang, an ANZ economist, also said it is unlikely to see a pause in credit tightening, quoting the faster-than-expected growth of 25.4 percent in fixed asset investment.
"We maintain our view that the central bank should raise the benchmark one-year deposit rate by 25 basis points in May or June," he said.
"As hikes in interest rates and reserve requirement have started to show diminishing effects, authorities will have to rely more on exchange rate policies, allowing a faster appreciation of the yuan to slow money growth and contain imported inflation," Liu said.
China has raised interest rates four times since October. The benchmark one-year deposit rate sits at 3.25 percent now, still behind inflation and translating into a negative interest rate.
China has raised the reserve requirement 10 times since 2010 with four increases made this year. Big banks in China now face a 20.5 percent reserve requirement.
People's Bank of China Governor Zhou Xiaochuan said on April 16 that there is no cap on the required reserve ratio while more aggressive interest rate hikes will lead to an influx of hot money.
M2, the broadest measure of money supply, grew a slower-than-expected 15.3 percent in April -- the slowest pace in 29 months, the People's Bank of China data showed today.
Chinese banks extended 739.6 billion yuan (US$113.9 billion) of new yuan loans in April, down 20.8 billion yuan from a year ago, but higher than March's 679.4 billion yuan.
"Both M2 and loan growth further moderated in April, consistent with the policy to control liquidity and with our expectation," said Cui Li, a Royal Bank of Scotland economist.
Though the bank data showed a slowdown of economic activities, other April economic indicators, including a higher-than-expected inflation and a surge in trade, showed China's economy still has a upside risk, economists said.
The Consumer Price Index, the main gauge of inflation, moderated slightly to 5.3 percent year on year from March's 5.4 percent but was still the second highest monthly reading in the past two years.
"In light of sustained inflation pressure, we maintain our call for another interest rate hike in the second quarter," Cui said. "We also expect the currency to continue its gradual climb at a 4 percent annualized rate and believe the softening in the Producer Price Index has reduced the pressure on yuan's rapid appreciation to counter the rise in import costs."
China's PPI rose 6.8 percent in April, down 0.5 percentage points from March.
Liu Ligang, an ANZ economist, also said it is unlikely to see a pause in credit tightening, quoting the faster-than-expected growth of 25.4 percent in fixed asset investment.
"We maintain our view that the central bank should raise the benchmark one-year deposit rate by 25 basis points in May or June," he said.
"As hikes in interest rates and reserve requirement have started to show diminishing effects, authorities will have to rely more on exchange rate policies, allowing a faster appreciation of the yuan to slow money growth and contain imported inflation," Liu said.
China has raised interest rates four times since October. The benchmark one-year deposit rate sits at 3.25 percent now, still behind inflation and translating into a negative interest rate.
China has raised the reserve requirement 10 times since 2010 with four increases made this year. Big banks in China now face a 20.5 percent reserve requirement.
People's Bank of China Governor Zhou Xiaochuan said on April 16 that there is no cap on the required reserve ratio while more aggressive interest rate hikes will lead to an influx of hot money.
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