China money supply surges

China's new lending and money supply growth both surged to record highs in March, as banks continued their explosive credit expansion in support of the government's efforts to rejuvenate the economy.

Banks extended 1.89 trillion yuan (Dh1.05trn) in local currency-denominated loans in March, bringing the total for the first quarter to 4.58 trillion yuan – nearing the government's full-year target of at least five trillion yuan.

That helped lift annual growth in the broad M2 measure of money supply to a record 25.5 per cent in March, up from 20.5 per cent in February and easily exceeding economists' expectations of a 21.3 per cent rise.

Liquidity surged despite the smallest quarterly rise in the country's foreign exchange reserves since the second quarter of 2001, reflecting slowing inflows through the trade surplus and foreign investment.

The reserves rose just $7.7 billion in the first three months, reaching $1.953trn at the end of March.

The surge in growth in the narrower M1 measure of money supply, to 17.0 per cent in March from 10.9 per cent in February, will likely be taken by analysts as a sign that businesses and consumers are switching more money to demand deposits – not included in M2 – as they prepare to ramp up spending.

China's economy has been hit hard by rapidly falling exports, but Beijing has launched a four trillion yuan stimulus package to soften the blow by boosting investment and consumption.

China said the economic situation was better than expected.

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