Beijing Puts Monetary Moves on Hold - Wall Street Journal

SHANGHAI—China's central bank said that stabilizing prices remains its priority, reinforcing signs that Beijing is unlikely to loosen the reins on the world's No. 2 economy any time soon despite mounting global uncertainties.

In a statement Monday, the People's Bank of China also gave fresh acknowledgment that its traditional measuring tools have failed to keep up with recent changes in the Chinese financial system. The bank said it is considering issuing an adjusted version of its benchmark measure of the supply of money in the economy to help plug the resulting gaps.

Bloomberg News A customer holds a 100 yuan banknote in a store in Shanghai. Data issued by the PBOC Sunday showed that money-supply growth slowed further last month, which the central bank said was in line with its "prudent" monetary policy

The PBOC's statement came after economic data over the previous three days showing growth and inflation both easing somewhat, but remaining strong. The data reinforced a growing consensus among economists that Beijing has likely pressed pause on any big monetary policy moves—after a series of rate increases over the last year—as it balances concerns about the weakness in advanced economies like Europe and the U.S. against ongoing wariness over consumer prices at home.

"There is some control over the causes of rising prices, but they haven't been eliminated," the PBOC said in Monday's statement. "Inflation remains high and stabilizing prices remains the top macro-control policy." The bank said China needs to continue its "prudent" monetary policy and maintain steady and appropriate credit growth.

Data issued by the PBOC Sunday showed that money-supply growth slowed further last month, which the central bank said was in line with its "prudent" monetary policy. China's broadest measure of money supply, M2, was up 13.5% at the end of August from a year earlier, slower than the 14.7% rise at the end of July, and below economists' expectations of 14.5%.

But the PBOC's statement Monday also said it is researching the addition of an "M2-Plus" measure of money supply, because the current M2 measure—which gauges bank deposits and cash in circulation—doesn't capture funds in wealth management products, which have expanded dramatically this year. That means the M2 readings have understated the total growth in money, which is a factor in inflation.

"The official M2 growth number has become a little less reliable than it once was," said Standard Chartered economists Li Wei and Stephen Green in a research note last week.

The PBOC noted that growth in lending hasn't been slow so far this year, pointing out that bank lending in August was up about 10 billion yuan ($1.56 billion) from the same month last year, when monetary policy was still loose.

"Overall liquidity conditions are appropriate and banks' provision levels are normal," the PBOC said. China's financial institutions issued 548.5 billion yuan of new yuan loans in August, up from 493 billion yuan in July and above economists' expectations of 500 billion yuan.

China's consumer price index rose 6.2% in August from a year earlier, slowing from July's 6.5% increase, which was the fastest rise in more than three years.

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