China wants money supply to rise 17%

The government has taken a number of measures to boost domestic demand and cope with the downturn, including repeated interest-rate cuts and a four trillion yuan (US$586 billion) stimulus package announced last month.

In the latest steps, posted on government Web sites late on Saturday, China said it would aim to expand the broad M2 measure of money supply by 17 percent.

It said liquidity for banks would be addressed with shorter term bills, and that more rate cuts and foreign exchange flexibility would be considered. “In order to face the attacks of the global financial crisis... we must expand the scope of financial supports,” the State Council or Cabinet said.

The new measures are “aimed at expanding domestic demand,” it said. China’s M2 money supply growth target for 2008 was 16 percent.

Among other proposals, the Cabinet urged the completion of the Growth Enterprise Board, a Nasdaq-style trading entity aimed at helping small start-ups gain better access to capital markets.

After years of blistering double-digit growth that has turned once agrarian China into a world economic powerhouse, the economy grew at only nine percent in the third quarter, and fourth-quarter numbers are set to be even worse.

China fears that growth at less than eight percent will fail to keep unemployment in check and provide jobs for the vast numbers of people entering the workforce each year in the world’s most populous nation.

“If China’s GDP growth rate falls to six or seven percent, the quality of development would be seriously impacted,” Liu Mingkang, chairman of the China Banking Regulatory Commission, was quoted as saying Saturday.

“China’s economic and financial outlook is not optimistic and Chinese banks will face stern challenges in 2009,” Liu said.

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