Chinese money-supply April update

To see the latest data please see the label Chinese Money Supply 

The Chinese money-supply data for April has been released. While it shows no further increases in the rate of growth, with YoY growth levels steady from March, it still shows significant expansion. The M1 measure showed a 31% YoY growth, a decline from its record-setting 39% in January, but still quite elevated; M2 growth dropped by 1% MoM to 21%, down 9% from its October record of 30%; M0 continued its increase at 16%; and the Money Multiplier increased 0.03 points to 5.9, an all-time high. The increasing MM is indicative of a continuing increase in lending, even as reserve-requirements increase (more below) and corroborates the "property bubble" story, but can not be considered evidence. What is clear from this is that there is still increasing demand for loans. While the numbers are nothing radically different from what we've seen in the last couple of months, the M0 growth is quite elevated and indicative of loose monetary policy, a little surprising considering the tightening--via reserve requirement increases--in January and February. It'll be interesting to see the May and June numbers considering the additional increase in reserve-requirements in May, as the numbers do indicate a heated economy.

Please note that, purportedly because of demand for physical cash money, there is a significant distortion around the Chinese New Year.

Chinese Money Supply

When China announced on January 12, 2010 that they were going to raise reserve requirements by 50 basis points everyone broke out in a panic about it. People speculated there would be crashes, that that there was a crazy China bubble or that the Chinese banks were driving asset-price bubbles through insane leverage. While the Chines Money Supply has indeed been growing faster than before as of late, that makes sense. Last year assets were depressed, leaving room for upside, and credit was hard to get. The Chinese central bank dropped reserve requirements by 50 basis points, which encouraged lending. As things settled down people resumed lending and borrowing. Nothing really crazy is going on. If you are part of the Minsky club, like I am, you consider a significant credit boom an essential part of a bubble. So, let's see if there really is some crazy Chinese bubble or if the Central Bank was just returning things to normal.
Please also note how high their reserves are. American banks keep only 10% of reserves on their transaction deposits (checking accounts). Savings accounts, and CDs are time deposits and have no mandated reserve requirement. Do your homework people. It's not that hard.
Sources:
People's Bank of China
Reserve Requirements (NY Fed)