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Lower liquidity on weak GDP
Print Edition
CHINA’S weaker economic growth caused overall liquidity in the country to be lower in August from last year and a slowdown in money supply.
Total social financing, the broadest measure of credit supply including loans, bank acceptance bills, corporate bonds and equity financing, recovered to 957.4 billion yuan (US$156.2 billion) in August from a six-year low of 273.1 billion yuan in July, the People’s Bank of China said in a statement yesterday.
However, the lending was still well below 1.57 trillion yuan in August last year and a monthly average of 1.47 trillion yuan for the first eight months.
M2, the broader measure of money supply, rose 12.8 percent from last year, missing an annual target of 13 percent. In July M2 increased 13.5 percent.
“Overall, if we smooth out the monthly volatility, monetary policy has shifted from a tightening bias toward a neutral stance since the second quarter,” said Zhu Haibin, chief China economist of J.P. Morgan.
“Looking ahead, we maintain our forecast that the PBOC will keep policy rate and RRR (reserve requirement ratio) unchanged for the rest of the year, and credit growth will stay stable.”
RRR is the amount of cash that banks have to put aside for risk management purposes. Chinese banks in August extended 702.5 billion yuan of new yuan loans, the PBOC said, an increase from an abrupt drop in July. But the loans were in line with economists’ expectations for around 700 billion yuan according to a Reuters poll.
Premier Li Keqiang said on September 8 that China can’t rely on strong monetary stimulus to boost the economy, and indicated the government can accept economic growth slightly off the 7.5 percent target.
The premier reassured that China will maintain stable policies and continue to roll out “targeted” measures to avert a sharper slowdown.
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