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Analysis: Record M2 growth signals Chinese economic recovery


08:11, October 15, 2012

A working staff counts the Chinese currency at a credit union. (Photo/Xinhua)

China's broad measure of money supply (M2) grew at a record speed in September, leading experts to believe that the country's pro-growth policies are working and market liquidity is improving.

The People's Bank of China (PBOC), the country's central bank, said Saturday that China's M2 rose 14.8 percent in September from a year ago, accelerating from the 13.5-percent growth registered in August.

The growth rate was the highest since July 2011 and well above the central bank's annual target of 14 percent.

Qu Hongbin, chief economist with HSBC China, said the rapid growth of the money supply shows that market liquidity is improving and the government's fine-tuning of its monetary policies has taken effect.

The PBOC has cut the reserve requirement ratio for banks twice and lowered benchmark interest rates this year to buoy economic growth, which slowed to its slowest rate in more than three years in the second quarter.

China's economy expanded by 7.6 percent year on year in the second quarter, slowing from 8.1 percent in the first quarter.

The growth rate marked the sixth consecutive quarter of decline and was the slowest pace since the first quarter of 2009.

Outstanding yuan-denominated loans reached 61.51 trillion yuan (9.72 trillion U.S. dollars) at the end of last month, up 16.3 percent year on year, the central bank said.

"Judging from the total volume of social financing, the overall liquidity at present is relatively eased and aggregate demand has seen signs of stabilizing," Qu said.

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