Finance operating on the 'right track' By Zhang Dingmin (China Daily) Updated: 2004-10-16 09:32
China's money supply continued to increase at a "basically appropriate" pace
in September, boosting confidence that the State's tightening measures to bring
the fast-growing economy to a soft-landing are working.
M2, the broad measure of money supply, grew by 13.9 per cent on a
year-on-year basis to 24.4 trillion yuan (US$2.9 trillion) at the end of last
month, the People's Bank of China (PBOC), the nation's central bank, said on
Friday.
September's M2 pace, which reflects aggregate demand in the economy, was 6.8
percentage points down from a year earlier, but up 0.3 percentage points from
the level recorded last month, a figure many analysts feared was too slow.
"Speaking overall, the current level of money supply is basically
appropriate," the PBOC said.
Outstanding renminbi loans rose by 13.6 per cent on a year-on-year basis to
17.3 trillion yuan (US$2.08 trillion) at the end of September, down 9.9
percentage points from a year earlier and down 0.5 percentage points from
August.
"Overall, financial performance was stable, and was in line with macro
management targets," the bank said.
China started to cool down frenzied fixed investment and loan growth, as well
as accelerating prices, in the second half of last year.
Authorities have taken a slew of measures, including three increases in bank
reserve requirements that restrict banks' lending capacity; and credit curbs and
land controls.
Subsequently, key indicators such as M2 and fixed investment growth numbers
have dropped in recent months, but the faster-than-expected downshift has
prompted new worries about an abrupt economic slowdown.
The marginal rebound in renminbi loan growth last month was a welcome sign,
analysts say, but they are still worried about the tightening measures
overshooting. "We are still concerned," said Li Ruoyu, an analyst with the State
Information Centre.
Although M2 growth rebounded, the pace of M1, which covers cash in
circulation and demand deposits, and reflects real demand more accurately, slid
by 1.4 percentage points to 13.7 per cent last month, she said.
The proportion of long-term loans in total bank lending continued to grow,
aggravating asset-liability mismatches at the banks, Li said, although the
slowdown in short-term loan growth, which analysts say is too rapid and has led
to liquidity difficulties at many small companies, was less abrupt in
September.
