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Brakes on money supply
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Money supply growth slowed in February, due to the government's monetary tightening policies.

M2, the broadest measure of money supply including cash and all deposits, rose 17.48 percent from a year earlier, the People's Bank of China, the central bank, said yesterday on its website.

That's 1.46 percentage points lower than January's figure. M1, the narrow measure of money supply including cash and demand deposits, rose 19.2 percent in February, 1.85 percentage points down from January.

"The slowdown of money supply growth is a result of the tightening policies, which are just starting to take effect," Peng Xingyun, an economist at the Chinese Academy of Social Sciences' institute of finance and banking, said.

The central bank has recently resorted to issuing bills and repo agreements to tackle liquidity, which contributed to slowing money supply growth.

The central bank raised the reserve requirement ratio, or proportion of money banks must set aside in reserve, to 15 percent in late January. It also issued 433 billion yuan worth of bills and conducted 886 billion yuan in repo agreements to mop up liquidity, as the country's forex reserve was $1.59 trillion by the end of January.

Lenders extended 243.4 billion yuan of new loans last month. That figure was 803.6 billion in January. The tightening policies are partly behind the slump in new yuan loans, as well as lower economic activity over February's Spring Festival holiday, Guo Tianyong, an economist at the Central University of Finance and Economics, said.

(China Daily March 13, 2008)

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