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China money supply growth slows on economic slowdown

(Xinhua)
Updated: 2008-12-15 20:49

China's money supply grew at a slower-than-average pace in November as the economy continued to weaken, the central bank said Monday.

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The M2, the broad measure of money supply covering cash in circulation plus all deposits, rose 14.8 percent to 45.86 trillion yuan ($6.72 trillion) by the end of November. The growth rate was down 0.22 percentage points from a month ago, according to the People's Bank of China (PBOC).

Experts said the M2 growth slowed for the sixth straight month because of decreased incomes and weakened demand.

The M1, the narrow measure of money supply covering cash in circulation plus demand deposits, grew 6.8 percent to 15.78 trillion yuan, down 2.05 percentage points from the end of October.

"This showed the sharp contraction of business activity as companies began to reduce stockpiles from October," said Liu Yuhui, a researcher at the Institute of Finance and Banking under Chinese Academy of Social Sciences.

Many companies, especially those in the industrial manufacturing and chemical industries, built up huge stockpiles on price bubbles last year and were forced to cut stockpiles after the bubbles busted on falling demand.

The slower M1 growth showed reduced production and investment on pessimistic views about the economic outlook, said Guo Tianyong, an expert of banking at the Central University of Finance and Economics.

China's economy grew 9 percent annually in the third quarter, down from 10.4 percent in the first half. Economic data for October and November indicated a risk of further decline.