Monetary easing 'no answer' to loan woes

PBOC official says statistics don't give full picture of credit conditions

China's liquidity is ample, and simply easing monetary policy won't help cash-starved private companies, a central bank official told a symposium on Tuesday.

Wang Yi, deputy director of the statistics and analysis department at the People's Bank of China, challenged the conventional wisdom that tight monetary policy in China is driving up financing costs for the private sector.

Slowdown curbs Q1 lending activity

Central bank in a monetary dilemma

Broad money supply, or M2, was up 12.1 percent year-over-year as of March 31, down from the expansion of 13.3 percent in February. This deceleration, along with the slower growth of total social financing - the broadest measure of credit - has been cited by many as proof that the PBOC is tightening credit.

But Wang pointed to flaws in the official statistics, which he said underestimate actual money supply. He said "massive" amounts of money have been transferred out of non-deposit-taking financial institutions, and these funds weren't counted in M2. In addition, fiscal deposits were excluded from the M2 calculation.

If these two factors were added, the growth of M2 should be about 14 percent, instead of 12.1 percent.

"Because of rapid innovation in financial products, many wealth management products, trusts and money market funds have moved beyond the scope of M2," he said.

Similar comments were made last week by Pan Gongsheng, a deputy governor at the central bank. Pan said that the financial sector has introduced so many innovative products in recent years that it has become much more difficult to calculate money supply.

Ample credit was also reflected in figures for new loans, according to Wang. New yuan loans in the first quarter reached 3.01 trillion yuan ($483 billion), up 259 billion yuan year-on-year.

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