China plans to target broad money supply growth of around 12% in 2017, slightly lower than last year’s goal, policy sources said, signaling a bid to contain debt risks while keeping growth on track.
Under its new “prudent and neutral” policy, the People’s Bank of China has adopted a modest tightening bias in a bid to cool torrid credit expansion, though it is treading cautiously to avoid hurting the economy.
The M2 growth target was endorsed by leaders at the closed-door Central Economic Work Conference in December, according to sources with knowledge of the meeting outcome.
“It’s not necessary to maintain last year’s high money supply growth,” said a source who advises the government. “A money supply rise of 11% should be enough for supporting growth, but we probably need to have some extra space, considering risks in the process of deleveraging.”
In 2016, the money supply target was around 13%, though it ultimately grew just 11.3% due to the effects of the central bank’s intervention to support the yuan, which effectively drained yuan liquidity from the economy.
Still, the central bank injected more cash through its open market operations, medium-term lending facility and standing lending facility, underpinning record lending of 12.65 trillion yuan (US$1.84 trillion) in 2016.
Last year’s M2 target reflected Beijing’s focus on meeting its economic growth targets, but top leaders have pledged this year to shift the emphasis to addressing financial risks and asset bubbles.