China’s money supply could grow 13% this year
China’s broad-based money supply growth is expected to grow around 13% this year, a sign that further monetary policy easing is likely, Reuters reported.
Top leaders have already pledged more on fiscal stimulus and “supply-side structural reforms” to removed excess capacity from the manufacturing sector and shut down “zombie firms.”
Already millions of workers are losing jobs amidst this painful restructuring of the world’s second-largest economy as the government seeks to avert a hard landing.
“A 13% rise in M2 is sufficient for keeping liquidity flush in the near term, but we may see faster rises later this year as the central bank is likely to loosen policy further,” an anonymous source told Reuters.
The sources also said the inflation forecast for this year was set to be around 3%, more than double the actual rate in 2015.
Premier Li Keqiang is expected to announce the new target at the annual parliament session that opens on Saturday. Other top party leaders endorsed the plan at a closed-door Central Economic Work Conference in December.
China’s top economic planner has said the government would target economic growth of 6.5% to 7% this year, confirming a Reuters report, and the sources said the money supply and inflation forecasts are in line with that target.
The money supply needs to be sufficiently liquid for the government to cut taxes and keep up infrastructure spending to compensate for the effects of tackling overcapacity, including unemployment.