China's new loans, social financing rise in Q1 (2)

DEPOSITS SURGE, INFLATIONARY CONCERNS MOUNT

The central bank data showed that new yuan-denominated deposits in March hit 4.22 trillion yuan, accounting for 69 percent of the first quarter's total.

"This inevitably affected M2," said Zhao Qingming, an economist at China Construction Bank.

Data showed that M2 rose from 13 trillion yuan in 2000 to 97.4 trillion yuan in 2012. The proportion of M2 in the country's GDP also ascended, triggering inflationary concerns.

China's fast economic growth needs the support of a certain size of M2, said Zhang Qizuo, an economist working on the strategic development of the G20 and emerging economies.

With regard to inflation, economists have maintained that the M2 increase has no inevitable connection with inflation.

"China's inflation cannot be explained simply by one reason. There are complicated factors behind inflationary pressures," said Yu Yongding, a member of the Chinese Academy of Social Sciences.

Situations in other major economies support the argument. For instance, Japan's consumer prices registered a negative growth, with the proportion of money supply in its GDP reaching as much as 238 percent.

Nevertheless, the unexpected M2 surge means accelerated economic restructuring is needed, said Li Daokui, a former advisor to China's central bank, adding that efforts should be made to expand the country's bond and capital markets.

The country should be aware of the fact that its economy is increasingly monetarized, said Liu Yuhui, a financial researcher with the Chinese Academy of Social Sciences, a government think tank.

According to a government work report delivered by former Premier Wen Jiabao on March 5, the central bank expects M2 to expand by just 13 percent this year, compared to forecasts of 16 percent in 2011 and 14 percent in 2012.

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