Nation's money supply soars by 21.6%
( 2003-09-12 07:13) (China Daily)
China's money supply is continuing to grow at a faster-than-desired clip in
August, adding to worries about inflation and overheating of the economy.
 The central bank said it will maintain its "prudent''
monetary policy to maintain consistency, but will step up open market operations
to ensure stable growth of the nation's money supply.
M2, the broad measure for money supply that covers cash in circulation and
all deposits, soared by 21.6 per cent on a year-on-year basis to over 21
trillion yuan (US$2.5 trillion) at the end of August, the fastest pace since
May, 1997, the People's Bank of China said in its monetary policy report
released yesterday.
China's money supply growth has been hovering at levels a few percentage
points above the 17 per cent target this year, as commercial banks accelerated
loans to tap a recovery in economic activity.
Financial institutions carved out 2.1 trillion yuan (US$253 billion) in
renminbi loans in the first eight months of the year, far outstripping the total
of 1.84 trillion yuan (US$221 billion) lent for all of last year.
The rapid loan increases, coupled with pressure from additional money
supplies released in absorbing excess dollars, have led to inflation concerns
within the central bank.
The bank announced last month it would raise required reserves at commercial
banks to 7 per cent of their total deposits, from 6 per cent currently.
The move, which takes effect at the end of next month, is widely estimated to
be able to freeze some 600 billion yuan (US$72 billion) of China's money
supply.
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