China walks monetary tightrope to keep debt in check, growth on track
Latest figures suggest funding for development projects still readily available despite slowest ever growth of money supply
China’s latest economic figures suggest the central bank is having to walk a fine line between controlling debt and supporting the government’s development plans, analysts said.
According to data published by the People’s Bank of China on Tuesday, the broadest measure of money supply, known as M2, rose 9.2 per cent in July, its lowest ever monthly expansion and far below the government’s 12 per cent annual target. Meanwhile, the value of all loans in the economy, or “aggregate social financing”, increased by 13.2 per cent year on year in July, against a target of 12 per cent.
Zhao Yang, chief China economist with Nomura Securities, told the Post on Tuesday that the bulk of China’s efforts to rein in debt were taking place “within the financial system”, so that support for the real economy, namely households, businesses and infrastructure projects, had “not fallen significantly”.
In the aftermath of the 2008 financial crisis, China adopted a “super loose” monetary policy in a bid to drive growth. The downside was that it sparked a huge increase in debt levels and financial risk.