M2 Money Supply Growth Tapped Another Record Low At the End of 2017


China’s M2 money supply growth hit another record low at the end of 2017, with observers pointing to the emergence of a fresh status quo for Chinese monetary policy.

Official data from the People’s Bank of China indicates that as the end of December 2017 China’s M2 balance was 167.68 trillion yuan, for record low year-on-year growth of 8.2%

M2 money supply growth for December was 0.9 percentage points below the figure for the preceding month, as well as 3.1 percentage points behind the reading for the same period last year.

According to analysts the slide in China’s M2 growth in December resulted from new lending fallen beneath expectations, causing weakness in derived deposits.

Another key factor was pressure placed on Chinese banks by imminent regulatory assessments, putting a squeeze on the balance sheets of lenders.

Observers contend that given China’s ongoing deleveraging campaign, slower M2 growth is likely to become the new status quo for Chinese monetary policy, as flagged by the People’s Bank of China itself back in August.

Ruan Jianhong (阮健弘), head of PBOC’s statistics department said that the central bank would continue to implement stable and neutral monetary policy, “control the sluice gate of money supply,” ensure rational growth in monetary credit and social financing, maintain stable and rational liquidity, strengthen regulatory coordination, stabilise market expectations, as well as make steady and orderly structural adjustments, in order to maintain a neutral monetary and financial environment for supply side structural reforms and high quality growth.

PBOC data indicates that in 2017 RMB lending increased by 13.53 trillion yuan, while foreign currency lending rose by USD$52.2 billion.