By Li Zengxin (chinadaily.com.cn)
Updated: 2007-09-13 16:41

Although growth of the money supply slowed in August compared with July, the country is still under pressure to control its bank loans.

Annual growth in the broad measure of money supply, or M2, was 18.09 percent in August from the same period last year, according to the People's Bank of China (PBOC). The narrow measure of money supply, or M1, continued to grow in August at 22.77 percent year-on-year, PBOC said.

In August, new bank loans increased 302.9 billion yuan as total bank loans rose to 27.1 trillion yuan, an increase of 16.96 percent year-on-year. Total bank deposits increased 646.2 billion yuan in August. However, household bank deposits continued to slide, falling 41.8 billion yuan from July.

The excessive liquidity, when it comes to the stock market, is most recently reflected by a new record-high subscription for a new share. Bank of Beijing, the third city-level commercial bank to list in the A-share market, reported frozen subscription funds of 1.896 billion yuan, surpassing the previous record of 1.629 billion yuan in the initial public offering of China COSCO Holdings.

The share price was set at 12.5 yuan, representing a 36.38 price to earnings ratio. Some 1.442 billion yuan was frozen in online subscriptions. The huge amount of capital for the application pressed down the acquirement rate to 0.78 percent.

In order to address excessive liquidity and inflation problems, China stepped up efforts to build a multi-layer capital market for both the fund-raisers and investors.

Tu Guangshao, vice chairman of the China Securities Regulatory Commission (CSRC) said yesterday that the country is ready to develop a bond market.

The banking and securities regulators are working on the integration of the inter-bank and the securities exchange markets.

The scope of participants in the market will also be enlarged to include insurance companies and commercial banks. Tu also said China may allow overseas institutions to issue bonds in the mainland in the future.

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