Money supply growth piles on the pressure

Source: Xinhua  |   2008-6-13  |     NEWSPAPER EDITION

CHINA'S money supply growth gained momentum last month, adding pressure to the appreciation of the yuan, which set a new high against the dollar yesterday.

The broad measure of money supply, M2, which covers cash in circulation plus all deposits, reached 43.62 trillion yuan (US$6.23 trillion) at the end of May, up 18.07 percent from a year earlier, the People's Bank of China said. The increase was 1.13 percentage points higher than that of April and a 1.78-percentage-point rise from the end of March.

The accelerated growth was expected to force the yuan to go up more quickly and further test government efforts to curb inflation, analysts said.

The yuan has risen more than 5.5 percent against the dollar this year.

Meanwhile, the statistics bureau said the consumer price index, the main gauge of inflation, rose 7.7 percent year on year last month.

"The CPI drop was within expectations but inflationary pressure will remain a big issue in the economy," said Guo Tianyong, head of the Central University of Finance and Economics banking research center.