China says inflation is still top priority

The People’s Bank of China says cutting the rate of inflation remains its top priority, even after price increases eased slightly in August.

China’s central bank said “the country will continue the prudent monetary policy and keep the growth of credit stable and moderate,” in a statement released on its website.

“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 consumer price index rose 6.2% in August, down slightly from 6.5% in July, though still around three-year highs.

Increases in the price of food have been driving overall prices higher. Food prices rose 13.4% in August from the same time a year ago, on top of a 14% increase in July.

The bank has raised benchmark lending rates five times since October, and increased reserve requirements to 21.5% in an attempt to slow the economy and drive down inflation.

Separately, the bank reported that China’s new yuan-denominated loans reached 548.5 billion yuan ($85.8 billion) in August, up 9.3 billion yuan from the same time a year earlier.

The bank also said the broad measure of the money supply rose 13.5% in August to 78.07 trillion yuan (US$12.20 trillion), 1.2 percentage points less than July’s growth and 5.7 percentage points lower than the same period last year.

The PBOC also said it is researching a new “M2+” measure to cover wider money supply metrics. The current M2 data fails to capture the amount of money in circulation because of the introduction of new wealth management products by China’s banks.

The SPDR S&P China ETF (GXC) has more than a quarter of its assets in financial services stocks, and three of China’s banks are among its top 10 holdings.