China's money supply growth maintained its high-speed momentum
last month, prompting economists to call for a "moderate
tightening" of the monetary policy to slow it down.
"The lending growth pace is very fast, which should be reined
in," said Niu Li, an economist with the State Information
Centre.
M2, a broad measure of money supply that covers cash in
circulation and all deposits, swelled 18.9 percent on a
year-on-year basis to 31.37 trillion yuan (US$3.92 trillion) at the
end of April, according to figures released yesterday by the
People's Bank of China, the central bank.
The growth rate was 4.8 percentage points higher compared with
the same period last year.
The central bank has set a growth target for the M2 of 16
percent this year.
Total lending climbed 14.8 percent on a year-on-year basis to
22.21 trillion yuan (US$2.78 trillion) by the end of last month,
the central bank said.
New local currency lending in April surged to a record 317.2
billion yuan (US$39.65 billion) from 142.2 billion yuan (US$17.78
billion) the same month a year ago, the central bank said.
Outstanding local currency loans in all financial institutions
stood at 20.96 trillion yuan (US$ 2.62 trillion) at the end of last
month, up 15.5 percent on a yearly basis and 3 percentage points
higher compared with the same period last year.
"All the figures indicate that the current financial situation
is a contributing factor to the fast investment and economy
growth," said Zhuang Jian, a senior economist with Asian
Development Bank's Resident Mission in China. He suggested the
central bank could consider taking further monetary measures to
fine tune the economy.
"The brisk growth in lending, in particular, should raise
concern, especially as to where the huge amount of lending ended
up," he added.
If too much loaned money ended up in the property market, it
could be a major problem, the economist said.
The central bank, in a bid to curb credit and investment growth,
raised the one-year benchmark lending rate by 27 base points to
5.85 percent on April 27.
"The new figures show that the central bank should follow up
last month's rate rise with other monetary measures," Niu Li said.
"More rate hikes or increasing the bank's required reserve ratios
should be considered and encouraged."
"But all those proposed measures should be moderate in their
intensity," he added.
The central bank will closely monitor the effects of its
policies and stick to a stable monetary policy, maintaining
reasonable growth in both the money supply and credit, it said on
its website yesterday.
The M1, an indicator reflecting liquidity and covering cash in
circulation and current account deposits, rose by 12.5 percent on a
year-on-year basis by the end of last month, down from 12.7 percent
in the first quarter.
Household deposits also maintained their upward trend last
month, the central bank said.
(China Daily May 16, 2006)
