Monday, December 15, 2008

China to raise money supply by 17% in 2009

China plans to increase the broad measure of money supply (M2) by 17% in 2009, as part of its new measures to stabilize its stock market and expand financing channels for companies to bolster the economy in the face of the global slowdown, according to a statement released by the State Council.

The council said the 17% growth of money supply would be 3 to 4 percentage points above the combined growth of economic output and consumer prices.

The cabinet also noted liquidity for banks would be addressed with shorter term bills and it would consider more rate cuts and foreign exchange flexibility, aiming at expanding the scope of financial supports.

The growth of China's money supply fell this year due to slower business activity and lower bank lending. M2 growth decreased to 15% last month from 16% in August, and the M2 money supply is projected to grow 16% this year, as per industry sources.

The central bank has already cancelled lending quotas since November, cut interest rates four times since September and encouraged banks to lend more money.

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