Source: Global Times Published: 2018-8-13
While China's July financial statistics showed the real economy is being supported by increased money supply, monetary policy cannot be the ultimate solution to economic pressures, said experts.
In July, China's broad M2 money supply grew 8.5 percent from a year earlier, beating forecasts for an expansion of 8.2 percent and up from 8.0 percent in June, data from the People's Bank of China (PBC), China's central bank, showed Monday.
China's total social financing, a broad measure of credit and liquidity in the real economy, was 1.04 trillion yuan ($151.06 billion) in July, lower than forecasts of 1.1 trillion yuan, according to the PBC.
Total social financing includes off-balance sheet forms of funding that exist outside the conventional bank lending system, such as IPOs, loans from trust companies and bond sales.
Chinese banks extended 1.45 trillion yuan in net new yuan loans in July, beating the forecast level of 1.275 trillion yuan.
"Driven by policy, with the PBC providing more liquidity to the market while also supporting small and micro-sized enterprises as well as the infrastructure sector, the new-loan figure in July exceeded forecasts," said E Yongjian, chief financial analyst at the Bank of Communications.
"More loans drove up the money supply. Overall, support for the real economy has been reinforced," said E.
"China's monetary policy has just started to shift to steady and relatively loose, yet to what degree it is shifting, one month's figure cannot indicate," said Wan Zhe, chief economist with the International Cooperation Center of the National Development and Reform Commission.
Even if monetary policy is shifting direction from relatively tight to relatively loose, this change won't be transmitted to total social financing immediately, Wan told the Global Times Monday.
"No matter how loose it is, its transmission to the real economy is limited," she noted. Meanwhile, the marginal effect of monetary policy is gradually decreasing.
As shown by recent heated debates, monetary policy itself cannot shoulder all the responsibility for a country's economic performance, especially given the external and internal pressures in the second half of the year, Wan said.
"It is becoming more and more impractical to only rely on monetary policy to solve all problems or stimulate economic development," Wan warned, stressing that other policies, including fiscal and tax policies, and improvement in the business climate should also play their role.
Wan Zhe is a visiting fellow of Chongyang Institute for Financial Studies at Renmin University of China.