China's money supply up 17% in April, tops target
China’s money supply growth exceeded the government target for a third month and lending accelerated, adding pressure on the central bank to raise interest rates.
By Agencies |
HONG KONG: China’s money supply growth exceeded the government target for a third month and lending accelerated, adding pressure on the central bank to raise interest rates.
M2, which includes cash and all deposits, rose 17.1% in April from a year earlier, the People’s Bank of China said on its website, after gaining 17.3% in March. That beat the 17% median estimate of 19 economists surveyed by Bloomberg News and the central bank’s 2007 target of 16%.
Outstanding yuan loans also rose more quickly last month than in March as tighter lending rules and higher borrowing costs failed to curb investments in factories and real estate. The People’s Bank of China has raised interest rates three times since April 2006, as well as increasing the amount lenders must set aside as reserves seven times, in a bid to slow asset bubbles and accelerating inflation.
“Lending is still very strong and that sustains fixed-asset investment,’’ said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong. “The central bank wants to reduce loan growth and make savings more attractive to cool the stock markets.”
Kowalczyk expects the central bank to raise both lending and deposit rates in June. The one-year benchmark lending rate is at 6.39%. Outstanding yuan loans climbed 16.5% in April from a year earlier, today’s statement said, up from 16.3 percent in March.
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Banks extended 422 billion yuan of new loans last month, making the total for the first four months 1.8 trillion yuan, more than half the total for the whole of last year. China’s economy, the world’s fourth-largest, grew 11.1% in the first quarter, accelerating from 10.4% in the previous three months. Fixed-asset investment in urban areas climbed 25.3% in the period, compared with 24.5% for the whole of last year. The central bank will continue “stable” monetary policy, strengthen liquidity control and guide “adequate” loan growth, using reserve requirements and open market operations as tools, it said in a quarterly monetary policy report. China’s trade surplus swelled 88% in first four months from a year earlier to $63.3 billion, pumping more cash into the economy and complicating government effort to rein in money supply, lending and fixed-asset investments.
China’s inflation accelerated to 3.3% in March, the highest in more than two years, and more than the central bank’s target of 3%. With the benchmark one-year deposit rate at 2.79%, Chinese households, concerned that they are losing money on savings held at banks, have rushed into the stock markets.
The benchmark CSI 300 Index has jumped 81% since the start of this year. Among Chinese 20,000 households surveyed by the central bank in February, a record high of 30.3% said they intend to invest their money in stocks and funds.
Investors in China opened 8.58 million new accounts at brokerages in the first quarter, up from 5.38 million for the whole of 2006, according to the China Securities Depository and Clearing Corp.
Outstanding yuan deposits rose 15.7% in April from a year earlier, Sunday’s statement said, down from 15.9% in March. M1, the narrower measure which includes cash and demand deposits, increased 20%, marking its fifth month of exceeding growth in M2.
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