China: Monetary Statistics For August 201111 September, 2011, 15:45. Posted by Zarathustra
Tags: Economy, Money Supply
The People’s Bank of China published the latest set of monetary statistics, which paints a somewhat mixed picture here.
M2 Money supply grew by 13.5% compared to a year earlier to RMB78.07 trillion, lower than expected growth of 14.2%. Money supply growth has fallen further below the pre-crisis average level of about 16.76%, and is still falling apparently. M1 Money supply grew by 11.2% yoy to RMB27.33 trillion, and Currency in circulation grew by 14.7%.
New Chinese Yuan loans in August amounted to RMB548.5 billion, which is above expectation of RMB500 billion, and well above the RMB 492.6 billion of new loans in July. Total deposits in August amounted to RMB80.31 trillion, increased by 13.3% compared to a year ago. Chinese Yuan deposits amounted to RMB78.67 trillion, rising 15.5% compared to a year ago.
Source: People’s Bank of China
The surprise on downside here is that money supply growth continues to fall, and it is now well below the average growth even before the uber-expansion of money and credit after the financial crisis. Of course, this is still a pretty rapid expansion on an year-on-year basis, but at least my view is that in terms of money supply, the central bank is headed towards a right direction. I would hope that the money supply growth continues to slow to low double-digit or high single-digit. Of course, monetary policy will not transmit into price level immediately, and the slowing monetary growth will only have an meaningful impact on prices after 6-12 months, possibly. At this point, I still maintain that inflation remains high, such that there is no reason to ease policy.