China Monetary Policy


New yuan loans and M2 both moderate in July

Credit growth slowed in July due to the monetary authority's efforts to rein in excess liquidity. New yuan loans totalled RMB 493 billion (USD 77 billion) in July, which was well below the RMB 555 billion expected by the market as well as the RMB 634 billion tallied in June. Meanwhile, M2, the broadest measure of money supply, rose 14.7% year-on-year, falling short of both the 15.9% increase tallied in June and market expectations of a 15.8% rise. Despite the remarkable slowdown in credit growth, analysts envisage that the monetary policy stance will remain ?prudent?, as inflationary pressures, which are targeted as policymakers' main priority, are still high. That said, analysts foresee a less aggressive monetary tightening in the months ahead due to rising uncertainties about global economic growth.

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