China plans to target broad money supply growth of around 12 percent in 2017, slightly lower than last year’s goal, policy sources said, signaling a bid to contain debt risks while keeping growth on track.
Under its new “prudent and neutral” policy, the People’s Bank of China (PBOC) has adopted a modest tightening bias in a bid to cool torrid credit expansion, though it is treading cautiously to avoid hurting the economy.
The M2 growth target was endorsed by leaders at the closed-door Central Economic Work Conference in December, according to sources with knowledge of the meeting outcome.
“It’s not necessary to maintain last year’s high money supply growth,” said a source who advises the government.
“A money supply rise of 11 percent should be enough for supporting growth, but we probably need to have some extra space, considering risks in the process of deleveraging.”
China’s State Council Information Office, the government’s public relations arm, has yet to respond to a request for comment.
In 2016 the money supply target was around 13 percent, though it ultimately grew just 11.3 percent due to the effects of the central bank’s intervention to support the yuan currency CNY=CFXS, which effectively drained yuan liquidity from the economy.
Still, the PBOC injected more cash through its open market operations, medium-term lending facility (MLF) and standing lending facility (SLF), underpinning record lending of 12.65 trillion yuan ($1.84 trillion) in 2016.
Last year’s M2 target reflected Beijing’s focus on meeting its economic growth targets, but top leaders have pledged this year to shift the emphasis to addressing financial risks and asset bubbles.
Reuters has reported that China will lower its 2017 economic growth target to around 6.5 percent from last year’s 6.5-7 percent. The economy expanded 6.7 percent in 2016.
Last week, state media cited a party statement issued after a meeting of the Politburo that China must maintain stable economic development and social harmony ahead of the 19th Communist Party Congress in the autumn.
Key economic targets will be announced at the opening of the annual parliament meeting on March 5.