April 24, 2018 / 10:27 AM / 3 months ago

UPDATE 1-China to cut RRR further, M2 growth seen accelerating - MNI

* M2 growth to grow 9 pct this year - MNI

* M2 grew 8.2 pct last year

* PBOC cut reserve requirement ratios for most banks last week (Adds context)

BEIJING, April 24 (Reuters) - China will further cut the amount of cash that lenders must keep in reserves, and broad M2 money supply growth will accelerate this year, Market News International reported on Tuesday, citing a source close to the central bank.

The report comes amid growing speculation that China is considering shifting its monetary policy to a looser bias, as the threat of a trade war with the United States adds to worries about an expected slowdown in the world’s second-largest economy in coming months.

The People’s Bank of China (PBOC) last week cut reserve requirement ratios (RRR) for most banks, hours after the statistics bureau reported softer-than-expected industrial output and investment growth for March, suggesting economic momentum may already be starting to slow.

The unexpected RRR cut is unlikely to be its last given the growing concerns about a possible trade war with the United States, economists told Reuters.

The PBOC has reiterated that its “prudent and neutral” policy stance remains unchanged.

The central bank did not immediately respond to a faxed request for comment on Tuesday.

China will strive hard to achieve this year’s economic targets, the politburo, a top decision-making body of the ruling Communist Party, said on Monday after a meeting, according to state media.

The 25-member politburo added that China will boost domestic demand to ensure the stability of the economy.

China’s stock markets posted their strongest gains in two months on Tuesday following the comments, as investors bet authorities may adopt more growth-boosting measures if exports start to falter.

“In general, we think the meeting may be signalling an easing bias in policy stance,” Goldman Sachs wrote in a note.

“This slight easing bias may be stemming from perceived risks related to the trade tensions and possibly weaker-than-expected data on activity, inflation and money and credit in March.”

Policymakers are walking a fine line by containing riskier types of financing and slowing an explosive build-up in debt without stunting economic growth.

While China’s official data suggests economic growth has been remarkably steady at 6.8-6.9 percent over the past year, Capital Economics estimated last week that growth peaked in July at 6.6 percent and slowed to 4.8 percent at the start of 2018 as policy tightened.

The regulatory clampdown, now in its second year, has also slowly pushed up companies’ borrowing costs and mortgage rates.

M2 growth - one measure of credit conditions - has moderated in recent months, evidence that the government’s “de-risking” and “deleveraging” campaign is working, according to the central bank.

M2 rose 8.2 percent in March from a year earlier, slower than the 8.8 percent pace in February and the 8.6 percent expansion in January.

But M2 growth is seen rising above 9 percent this year, MNI reported, citing the source, whom it did not identify.

M2 expanded 8.2 percent last year, the slowest pace since records began in 1996.

In his annual work report last month, Premier Li Keqiang said he expected reasonable growth in M2 and total social financing this year, without giving hard targets. (Reporting by Beijing Monitoring Desk and Ryan Woo; Editing by Kim Coghill)

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