China’s money supply growth hits new high in October

China’s money supply growth hits new high in October

The People’s Bank of China released on Friday, November 11, its 2005 financial statistics for October. China’s financial industry was healthy and steady in October. M1 (all currency in circulation plus that in checking accounts) saw a sharp rate of growth, and the growth rate of M2 (M1 plus savings accounts) hit a new high. There was a moderate amount of bank loans in October, and the loan structure was improving. The inter-bank interest rate was low. By the end of October 2005, the balance of M1 was RMB 10.18 trillion ($1.26 trillion), up 12.1 percent year on year. The growth rate of M1 was up 0.5 percentage points over the previous month. The growth rate kept going up, and the liquidity of currency somewhat increased. M2 was RMB 28.76 trillion ($3.56 trillion) by the end of October, a year-on-year increase of 18 percent. The growth rate of M2 was up 0.1 percentage points compared to last month, indicating a slight cooling compared to September’s 0.6 percentage point rise over August. However, in year-on-year terms, M2’s growth rate was up 4.5 percentage points year on year. The October inter-bank interest rate was 1.44 percent, a month-on-month decline of 0.07 points. The exchange rate of the yuan was relatively stable. By the end of October, the exchange rate of the yuan against the US dollar was 8.084，0.009 points lower compared to the previous month. Influenced by the anticipation of an appreciation of the yuan, the growth rate of M2 hit a new high and M1 showed a rapid increase. In addition, it should be kept in mind that the liquidity of currency increased. These factors show that company capital increased and that purchasing power improved. Moreover, the tight capital situation has been somewhat alleviated. SteelOrbis Shanghai