Better data show China may not ease monetary policies further
By Feng Jianmin |
October 15, 2012, Monday
|
Print Edition
Print Edition
CHINA posted the fastest growth in money supply in 15 months in September and exports picked up at the quickest pace in three months, leading analysts to say the government may not ease monetary policies further as the stimulus policies are working.
M2, the broadest measure for money supply, climbed 14.8 percent in September from a year earlier, the People's Bank of China said in a statement on Saturday.
That's 1.3 percentage points quicker than August's and surpassed economist expectations of 13.7 percent according to a Bloomberg News survey.
"The increase in M2 shows that liquidity is improving and the government's fine-tuned monetary policies are working," said Qu Hongbin, chief economist at HSBC. "Domestic demand is stabilizing, which may lead to the gross domestic product to recover in the fourth quarter."
Meanwhile the country's foreign currency reserves totaled US$3.29 trillion by the end of September, up from US$3.24 trillion in June. The central parity rate of the yuan weakened to 6.341 per US dollar at the end of September from June's 6.325.
The rise in the reserves soothes previous worries that a weakening yuan may lead to outflow of foreign capital, exacerbating a liquidity strain.
Also on Saturday, a customs report showed that September exports climbed 9.9 percent, the fastest pace in three months, while imports rose 2.4 percent, recovering from a drop in August, raising hopes of a rebound in global demand.
Analysts said the PBOC may worry more about inflation due to rising money supply, and will not cut the bank reserve requirement ratio or interest rates in the fourth quarter.
Zhou Xi, an analyst with Bohai Securities, said that easing monetary policies when demand for loans by companies was weak would cause inflation and not boost the economy effectively.
"The central bank prefers adjusting liquidity through open market operations," Zhou said. "It is not likely to cut requirement ratio or interest rate unless it sees an obvious increase in long-term loans."
The PBOC has cut the reserve requirement ratio for banks twice and lowered benchmark interest rates this year to buoy economic growth, which slowed to its slowest rate in more than three years in the second quarter.
E Yongjian, a researcher with the Bank of Communications, noted the structure of new yuan-denominated loans has improved.
In September, new mid- and long-term loans to enterprises totaled 127.7 billion yuan, or 20 percent of total new loans last month, up from 17 percent in August, the PBOC said.
M2, the broadest measure for money supply, climbed 14.8 percent in September from a year earlier, the People's Bank of China said in a statement on Saturday.
That's 1.3 percentage points quicker than August's and surpassed economist expectations of 13.7 percent according to a Bloomberg News survey.
"The increase in M2 shows that liquidity is improving and the government's fine-tuned monetary policies are working," said Qu Hongbin, chief economist at HSBC. "Domestic demand is stabilizing, which may lead to the gross domestic product to recover in the fourth quarter."
Meanwhile the country's foreign currency reserves totaled US$3.29 trillion by the end of September, up from US$3.24 trillion in June. The central parity rate of the yuan weakened to 6.341 per US dollar at the end of September from June's 6.325.
The rise in the reserves soothes previous worries that a weakening yuan may lead to outflow of foreign capital, exacerbating a liquidity strain.
Also on Saturday, a customs report showed that September exports climbed 9.9 percent, the fastest pace in three months, while imports rose 2.4 percent, recovering from a drop in August, raising hopes of a rebound in global demand.
Analysts said the PBOC may worry more about inflation due to rising money supply, and will not cut the bank reserve requirement ratio or interest rates in the fourth quarter.
Zhou Xi, an analyst with Bohai Securities, said that easing monetary policies when demand for loans by companies was weak would cause inflation and not boost the economy effectively.
"The central bank prefers adjusting liquidity through open market operations," Zhou said. "It is not likely to cut requirement ratio or interest rate unless it sees an obvious increase in long-term loans."
The PBOC has cut the reserve requirement ratio for banks twice and lowered benchmark interest rates this year to buoy economic growth, which slowed to its slowest rate in more than three years in the second quarter.
E Yongjian, a researcher with the Bank of Communications, noted the structure of new yuan-denominated loans has improved.
In September, new mid- and long-term loans to enterprises totaled 127.7 billion yuan, or 20 percent of total new loans last month, up from 17 percent in August, the PBOC said.
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