China's central bank yesterday expressed pronounced worries
about the rapid growth in the nation's money supply, but insisted
it would keep interest rates on deposits and loans "basically
stable."
It also said it will keep the exchange rate of the yuan
generally unchanged but will improve the exchange rate determining
mechanism.
Chinese 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 lendings of 1.84 trillion yuan
(US$221 billion) for all of last year.
Driven by the rapid loan rises, M2, the broad measure for money
supply that covers cash in circulation and all deposits, soared by
21.6 percent on a year-on-year basis to 21.06 trillion yuan (US$2.5
trillion) at the end of August, the fastest pace since May
1997.
The money supply growth has been hovering at levels a few
percentage points above the 17 percent target this year, leading to
inflationary fears within the central bank.
Coupled with fast fixed asset investments which the National
Bureau of Statistics said yesterday soared by 30.7 percent on a
year-on-year basis to 361.1 billion yuan (US$43.5 billion) in
August, rapid money supply growth fuelled worries about overheating
in the economy.
The bank announced last month it would raise required reserves
at commercial banks to 7 percent of their total deposits, from 6
percent currently.
The move is widely estimated to be able to freeze some 600
billion yuan (US$72 billion) in money supply.
(China Daily September 18, 2003)
