Thanks largely to a hike in required bank reserves, the People's Bank of China (PBOC) reported that money supply growth had started to show signs of slowing down.
M2, the broad measure of money supply that covers cash in circulation and all deposits, stood at RMB 21.4 trillion at the end of September, up 20.7 percent from a year earlier. The pace was down from 20.8 percent year-on-year growth at the end of June and the high of 21.6 percent recorded for the month of August.
Financial institutions issued RMB 690.5 billion in new loans in the third quarter of this year, which was RMB 282.3 billion less than the second quarter. However, aggregate outstanding loans rose by RMB 2.5 trillion in the first nine months of the year, RMB 624 billion more than the total loan increases for all of 2002.
Chinese banks have stepped up lending this year largely as a result of improved economic activity and partly to dilute their non-performing loan ratios. Central bank warns of imbalances.
The central bank, the PBOC, warned that large imbalances remain in the Chinese economy as the gaps widened between investment and consumption as well as between urban and rural development.
Retail sales rose 8.6 percent in the first three quarters of this year while investment in fixed assets rose 30.5 percent. Development in urban areas far outpaced that in rural areas and the half of the workforce engaged in agricultural production contributed only 15.4 percent of GDP in 2002.
The PBOC also warned that growth in the economy was unevenly distributed in favor of a handful of industries including automobiles, steel, cement and real estate.