China Monetary Policy


New yuan loans and M2 slow in May

Credit growth moderated in May, throttled by the aggressive monetary tightening policy in place since October 2010. New yuan loans totalled RMB 552 billion (USD 85 billion) in May, which was below the RMB 650 billion expected by the market as well as the RMB 740 billion tallied in April. Nevertheless and in spite of more subdued readings in new loans, the government hiked the reserve requirement ratio by 25 basis points to 21.5% for big lenders early in June. Meanwhile, M2, the broadest measure of money supply rose 15.1% year-on-year, undershooting both April's reading of 15.3% increase and market expectations of a 15.5% rise.

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