April 15, 2014 / 4:06 AM / 4 years ago

UPDATE 1-China March money supply growth weakest since 2001

(Adds context, quotes)

BEIJING, April 15 (Reuters) - China’s money supply grew at the weakest pace in more than a decade in March, another sign of softening economic momentum, with analysts saying a fall in the yuan looked to have slowed capital inflows and the build-up of foreign exchange reserves.

Broad M2 money supply grew 12.1 percent last month from a year earlier, below a forecast of 13 percent in a Reuters poll. The growth rate was the slowest since May 2001, according to National Bureau of Statistics data.

“This is the first time that the M2 growth moderated to below the announced target of 13 percent since April 2012, indicating that the deleveraging process in the financial institutions continues,” said Zhou Hao, economist at ANZ in Shanghai.

Chinese banks made 1.05 trillion yuan ($168.8 billion) of new yuan loans in March, recovering from a dip to 644.5 billion in February caused by the Chinese New Year holidays.

However, the growth in total outstanding loans slowed to an eight-year low of 13.9 percent, Thomson Reuters data showed.

“The slowing capital inflows and decelerated growth of foreign reserves are likely to be the main reasons of the slowing growth of M2,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

The yuan fell some 2.7 percent against the dollar in the first quarter, nearly erasing all of its gains last year.

Traders and analysts said the sharp fall was engineered by the central bank as a way of introducing risk and curbing speculation on what had been seen as a one-way bet.


Total social financing (TSF), a broad measure of liquidity, jumped to 2.07 trillion yuan, more than double February’s 938.7 billion yuan. Similar jumps occurred after the Chinese New Year holidays in 2012 and 2013, central bank data showed.

But the March TSF was almost 19 percent lower than a year earlier, and for the quarter it was down an annual 9 percent.

China’s foreign exchange reserves, the world’s largest, rose to $3.95 trillion at the end of March from $3.82 trillion at the end of 2013, with their quarterly rate of growth slowing.

There has been an almost unabated run of soft data out of China this year. Figures on Wednesday are forecast to show the world’s second-largest economy grew an annual 7.3 percent in the first quarter, the weakest in five years, a Reuters poll found.

“In general, we think the government will keep monetary policy relatively loose due to weak economic situation in the first half of this year,” said Li, of Shenyin & Wanguo Securities. ($1 = 6.2191 Chinese Yuan) (Reporting by Adam Rose, Kevin Yao and Xiaoyi Shao; Editing by John Mair)

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