Economy

Markets

Industries

Insights

Reports

Events

Money supply rises in May

By Xin Zhiming (China Daily)
Updated: 2008-06-13 08:49

The growth of money supply in May accelerated to 18.07 percent, up from 16.94 percent in April, while lending growth edged up slightly to 14.9 percent, underscoring challenges policymakers face in battling inflation and excess liquidity.

The annual growth in the broad measure of money supply, or M2, rose 1.13 percentage points higher than in April and 1.33 percentage points higher than the end of last year, according to a statement by central bank yesterday.

"The money supply level shows that ample liquidity remains a problem," said Ma Qing, economist with China Economic Business Monitor, a Beijing-based investment advisory firm.

Despite the drop in the overall trade surplus in the first five months, China's foreign exchange reserves have been increasing rapidly. Over the weekend, the authorities raised the reserve requirement ratio, or proportion of money lenders must hold in reserve, by 1 percentage point - usually the margin is half a percentage point - to mop up liquidity.

Although the increase in lending is not significant, Ma said many companies are borrowing from non-official channels, such as inter-corporate borrowing. "The amounts of such lending are huge, and therefore, although the tightening policy is taking effect, liquidity is ample in the market," he said.

New yuan loans in May amounted to 318.5 billion yuan ($46.1 billion), compared with 463.9 billion yuan in April. New yuan lending for the first five months totaled 2.11 trillion yuan, or 58 percent of the lending target of 3.63 trillion yuan for this year.