China’s State Council announced on Saturday that it would increase the money supply by 17% in 2009 as part of efforts to spur consumer spending and bolster the economy in the face of a global downturn, AP reported. It plans to keep money supply growth 3 to 4 percentage points above growth in economic output and consumer prices. Through increasing the money supply more credit will be available to consumers and companies. Money supply growth has slipped this year as business activity and bank lending slowed. China’s M2 money supply – the broadest measure, which includes cash and bank deposits – shrank from 16% in August to 15% in November. The State Council has also decided to increase this year’s lending quota for policy banks to US$14.6 billion and stop or reduce the sale of central bank notes.
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