M2 reaches new high

China's broad money supply covering cash in circulation and deposits, also known as M2, stood at 103.61 trillion yuan ($16.71 trillion) as of the end of March, a record high and up 15.7 percent from the same time last year, according to a report released Thursday by the People's Bank of China (PBC), the country's central bank.

The report also showed new yuan loans climbing to 2.76 trillion yuan over the first three months, up 294.9 billion yuan from the same period last year; while new deposits totaled 6.11 trillion yuan, up 2.35 trillion yuan year-on-year.

The widening of China's massive money supply confirms several earlier predictions that the central bank would turn to a looser monetary stance in 2013 amid mounting foreign exchange inflows and poor conditions in the credit market, experts contacted by the Global Times explained.

Several prominent financial institutions both at home and abroad - including Bank of China, HSBC and Japanese broker Nomura Securities - predicted in November and December that China's central bank would adopt less rigid monetary policies to bolster economic growth through 2013.

Given ongoing signs of malaise in the broader Chinese economy as well as a recent deceleration in inflation growth, domestic financial regulators are motivated now to expand liquidity, Yuan Gangming, a scholar with the Center for China in the World Economy at Tsinghua University, told the Global Times.

China's consumer price index (CPI), a major gauge of inflation, rose by 2.1 percent year-on-year in March, 1.1 percentage points below the annual rise recorded in February, the National Bureau of Statistics (NBS) announced Monday. Earlier in the month, most experts had been predicting a 2.5-percent rise in March's CPI, according to local media reports.

NBS data issued in January showed China's GDP expanding 7.8 percent in 2012 over the previous year, the slowest annual growth pace since 1999.

Meanwhile, recent inflows of overseas capital - marking a sharp reversal from last year, when money exited China - have been another force behind the country's expanding M2, Wu Xiaoling, the former deputy governor of China's central bank, said at the China Financial Policy Symposium held by CEIBS Lujiazui Institute of International Finance Monday.

China's foreign exchange reserves stood at 3.44 trillion yuan at the end of March, up 130 billion yuan from the end of December, the PBC also reported Thursday.

Qian Xuening, deputy secretary-general with the Lujiazui Institute from the Chinese Academy of Social Sciences, offered the Global Times another possible explanation for the growing monetary supply. "Poorly-developed financing vehicles have forced domestic enterprises to rely on bank borrowing for capital, which has prompted the PBC to inject more money into the market to meet credit demand," said Qian.