China stops setting growth target for M2
Stable and neutral monetary policy to continue, along with control of the overall money supply and scale of social financing
For the first time in nine years, the Chinese government has not set a growth target for the broad M2 money supply in its latest work report, The Paper reported.
Premier Li Keqiang said in the 2017 Government Work Report on Monday that it will continue to adopt a stable and neutral monetary policy, control the overall money supply and maintain reasonable growth of M2, credit and the scale of social financing.
It will also act to safeguard a reasonable and stable liquidity and increase the proportion of direct financing, especially equity financing.
In the previous year’s Government Work Report, both M2 and the balance of social financing were expected to grow around 12%.
Insiders believe that not mentioning a specific target value for M2 signals that the government may dilute control over the total amount of money supply.
However, there is a certain degree of omission of M2 in the existing statistical standard. For example, M2 may not be able to measure the rapidly expanding shadow banking sector, the report said.