M2 sees slowest rise in 29 months
By Zhang Fengming |
May 12, 2011, Thursday
|
Print Edition
Print Edition
CHINA'S money supply in April posted the slowest pace of growth in 29 months on the central bank's tightening measures.
M2, the broadest measure of money supply, grew by a slower 15.3 percent last months, data by the People's Bank of China showed yesterday.
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 679.4 billion yuan lent in March.
"Both M2 and loan growth further moderated in April, consistent with the policy intention of liquidity containment and in line with our expectations," said Cui Li, a Royal Bank of Scotland economist.
Economists cautioned that China's economy still has an upside risk because other economic data for April indicated a higher-than-expected inflation and strong trade.
The Consumer Price Index, the main gauge of inflation, eased slightly to 5.3 percent year on year from March's 5.4 percent. But it was still the second-highest monthly reading in the past two years.
"In light of the 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 annual rate, and believe the softening in the Producer Price Index has reduced the pressure for a rapid appreciation to counter the rise in import costs."
China's PPI rose 6.8 percent in April, down 0.5 percentage point from March.
Liu Ligang, an ANZ economist, said it's unlikely monetary tightening would be halted, citing the faster-than-expected 25.4 percent rise in fixed-asset investment.
"We maintain our view that the central bank will raise the benchmark one-year deposit rate by 25 basis points in May or June," he said.
But Liu is divided on the yuan's rise as he sees a faster appreciation.
"As hikes in interest rates and banking reserve requirements have started to show diminishing effects, the authorities will have to rely more on exchange rate policies (by) 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 key one-year deposit rate is 3.25 percent now, still lower than inflation. It has hiked reserve requirement ratio 10 times since 2010, with four hikes this year. Big banks in China face a 20.5 percent reserve requirement now.
M2, the broadest measure of money supply, grew by a slower 15.3 percent last months, data by the People's Bank of China showed yesterday.
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 679.4 billion yuan lent in March.
"Both M2 and loan growth further moderated in April, consistent with the policy intention of liquidity containment and in line with our expectations," said Cui Li, a Royal Bank of Scotland economist.
Economists cautioned that China's economy still has an upside risk because other economic data for April indicated a higher-than-expected inflation and strong trade.
The Consumer Price Index, the main gauge of inflation, eased slightly to 5.3 percent year on year from March's 5.4 percent. But it was still the second-highest monthly reading in the past two years.
"In light of the 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 annual rate, and believe the softening in the Producer Price Index has reduced the pressure for a rapid appreciation to counter the rise in import costs."
China's PPI rose 6.8 percent in April, down 0.5 percentage point from March.
Liu Ligang, an ANZ economist, said it's unlikely monetary tightening would be halted, citing the faster-than-expected 25.4 percent rise in fixed-asset investment.
"We maintain our view that the central bank will raise the benchmark one-year deposit rate by 25 basis points in May or June," he said.
But Liu is divided on the yuan's rise as he sees a faster appreciation.
"As hikes in interest rates and banking reserve requirements have started to show diminishing effects, the authorities will have to rely more on exchange rate policies (by) 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 key one-year deposit rate is 3.25 percent now, still lower than inflation. It has hiked reserve requirement ratio 10 times since 2010, with four hikes this year. Big banks in China face a 20.5 percent reserve requirement now.
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