China's money supply rose 18.09 percent last month compared with August last year, but the growth rate was lower than the 18.48 percent recorded in July, the People's Bank of China (PBoC) said on Wednesday.
By the end of August, China's broad measure of money supply, M2, which covers cash in circulation and all deposits, reached 38.72 trillion yuan (5.09 billion U.S. dollars).
The month-on-month slowdown shows a series of macro-control policies to curb the excess liquidity have begun to take effect, market observers said.
Meanwhile, the narrow measure of money supply, or M1, was 14.1 trillion yuan, up 22.77 percent year on year, according to the PBoC, China's central bank.
M1 is an antecedent index for a country's economic performance, reflecting the change in the amount of money in the hands of residents and enterprises, while M2 indicates the monetary demand of the whole of country and possible inflation.
With the surging trade surplus, "excess liquidity" has become the overriding concern in the Chinese economy. An important factor to measure liquidity, China's M2 has maintained its growth since early this year.
The booming money supply has increased China's risk of inflation, with the consumer price index, or CPI, a major inflation barometer, surging 6.5 percent in August, the highest monthly rise in 11 years.
Another important index to measure the monetary liquidity is the gap between bank deposits and loans, also on the rise this year. During the first seven months, China's new renminbi-dominated loans reached 2.77 trillion yuan, equal to 87 percent of last year's total.
The central bank figures also indicated that the renminbi-dominated loans kept rising in August, with new loans in August hitting 302.9 billion yuan, and that of the first eight months totaled 3.08 trillion yuan, increasing 543.8 billion yuan from the same period last year.
The outstanding renminbi-dominated deposits amounted to 37.74 trillion yuan by the end of August, up 16.52 percent from the same period last year, with the growth rate 0.3 percentage points lower than the end of 2006.
Household deposits continued to decline in August, dropping 41.8 billion yuan from July's figure and 161.6 billion yuan from August last year.
Curbing excess liquidity has become an important target for China's macro-control policy. This year, the government has raised the reserve requirement ratio seven times and interests rates four times.
The State Council also cut tax on the interest on personal bank savings from 20 to five percent from Aug. 15.
Meanwhile, the Ministry of Finance has increased the issue of treasury bonds to reduce liquidity in the banking system.
Source: Xinhua
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