China Likely to Set M2 Growth Target at Record Low

China is likely to set its 2018 money growth target at an all-time low of around 9% to curb debt risks and contain asset bubbles, the official China Daily reported on Monday, citing economists involved in high-level policy discussions.
Financial risks have become the biggest threat to the country’s economic stability in the medium and long term, Reuters quoted the daily as saying.
In the past year, deleveraging efforts in the financial system have pushed broad M2 money supply growth to its lowest since records began in 1996.
In November, M2 expanded 9.1% from a year earlier, below the government’s full-year target of around 12%. The central bank has said slowing M2 growth could be a “new normal” as the government cracks down on riskier banking activities.
In the past decade, the government has set its annual M2 targets between 12% and 17%. But authorities walk a fine line as they try to curb risks without pushing borrowing costs too high, which could slow economic growth and roil financial markets.
Even as M2 growth slowed, bank lending hit a fresh record in November. Analysts said the jump in new loans was due to a crackdown on off-balance sheet lending, forcing banks to issue more formal loans.
Total social financing, a broad measure of credit and liquidity in the economy, rose to 1.6 trillion yuan ($244 billion) in November from 1.04 trillion yuan a month earlier.
The monetary authority is considering replacing M2 with a series of interest rates to monitor monetary policy and to achieve the final targets of stable prices and sound economic growth, Yi Gang, vice-governor of the central bank, said.
"The seven-day repo rate and 10-year treasury bond rate become more important to determine asset prices and the market-oriented reform of interest rate liberalization is steadily advancing," he said.
Vice-Minister of Finance Zhu Guangyao, said at a forum on Saturday that M2 is the "key indicator" to ensure a "prudential and neutral" monetary policy.