China increases money supply and relaxes credit to ?fine tune? the economy

Last month, the central bank cut the amount of money banks have to hold in reserve for the first time since 2008. Chinese authorities are seen to be spurring domestic growth amid fears of a slowdown in the US and Europe.
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China had previously been struggling to tame high inflation and therefore the central bank had been tightening monetary policy. However, analysts said the lending figures out on Sunday show a shift in policy towards easing to encourage lending.
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Both lending and money supply growth beat analysts' expectations. China's total cash in circulation and all deposits rose by 13.6% in December compared to the same month last year.
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This is a higher rate of increase than November's money supply figure, which was up 12.7% on the year before. Analysts had been expecting money supply to grow to 12.9%. New loans were expected to hit 580bn Yuan in December.
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The central bank said in a statement on Sunday that it will leave the option to 'fine tune' measures open while maintaining a prudent monetary policy. This echoed comments from Premier Wen Jiabao after a two-day financial policy meeting that authorities would leave room to adjust policy as needed.
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Analysts said this suggests that China may be open to further easing of its credit restrictions, including another cut to bank reserve ratios in coming weeks.
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Premier Wen Jiabao said authorities would leave room to adjust policy as needed
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Source: http://en.mercopress.com/2012/01/09/china-increases-money-supply-and-relaxes-credit-to-fine-tune-the-economy?utm_source=feed&utm_medium=rss&utm_content=main&utm_campaign=rss

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