The performance offinancial industry remained healthy and stable in August, as reflected in thatgrowth of money supply and RMB loans decelerated, expansion of loans under maincategories markedly contracted on a year-on-year basis, growth of savingsdeposits continued to fall, the money market interest rate and RMB exchangerate remained stable.

1.     Moneysupply slowed down

Accordingto statistics, the growth of broad money supply (M2) decelerated. At end-August, M2 reached RMB23.97 trillion yuan, increasingyear-on-year by 13.6 percent, 1.7 percentage points lower from the end of July.Narrow money(M1) rose toRMB8.91 trillion yuan, increasing by 15.1 percent, approximately at the samelevel as at end-July. Adjusting for seasonal factors, the annualized month-on-month growthrate of broad money supply M2 in August was 6.5 percent, remaining at the samelevel as that recorded for the previous month. Cash in circulation (M0) stood atRMB1.95 trillion yuan at end-August. Net cash injection in August aloneamounted to RMB10.9 billion yuan, RMB13.6 billion yuan less than the sameperiod of 2003.

2.     Growthof bank loans continued to slide with RMB loans decreasing year-on year by RMB165.1billion yuan

Outstandingloans denominated in both local and foreign currencies in all financialinstitutions (including foreign-funded ones) increased year-on-year by 14.5percent to RMB18.22 trillion yuan at end-August, 1.4 percentage points lowerthan the growth recorded at end-July. Outstanding RMB loans reached RMB17.1trillion yuan, increasing year-on-year by 14.1 percent, a drop of 1.4percentage points from end-July. The annualized month-on-month growth was equalto 7.2 percent after seasonally adjusted.

New RMB loans in August were RMB115.7billion yuan, RMB165.1 billion yuan less than the same period of last year. Inparticular, short-term loans and negotiable bills financing incremented by RMB34billion yuan, with the growth decreasing year-on year by RMB129.7 billion yuan;medium and long term loans grew by RMB74.7 billion yuan, RMB59 billion yuanless than the same period of last year.

At end-August, outstandingforeign currency loans increased year-on-year by 20.3 percent to USD134.4billion, 2.5 percentage points lower from the end of July. Foreign currency loans in August amounted to USD 600 million, downby USD2.4 billion on a year-on-year basis. Cumulativeincrease of foreign currency loans in the first eight months reached USD15.6billion, USD3.4 billion less than the growth recorded for the same period of2003.

3.     Growthof deposits in financial institutions dropped with household savings deposits fallingfor seven months in a row

Outstandingdeposits denominated in both local and foreign currencies in all financialinstitutions (including foreign-funded ones) reached RMB24.53 trillion yuan atend-August, representing a year-on-year increase of 16.7 percent, which is 4.2percentage points lower from a year earlier. In particular, household depositsreached RMB12.14 trillion yuan, increasing by 13.8 percent, a drop of 4.1percentage points; corporate deposits stood at RMB8.37 trillion yuan,increasing by 17.2 percent, down by 4 percentage points.

Atend-August, outstanding RMB deposits reached RMB 23.25 trillion yuan,increasing year-on-year by 17.6 percent, with the annualized month-on-monthgrowth equal to 12.5 percent excluding seasonal factor, 2.6 percentage points lowerthan the growth recorded at end-July. In particular, RMB savings deposits stoodat RMB11.4 trillion yuan, increasing by 15.3 percent from a year earlier, 0.6 and 4.7 percentagepoints lower than end-Juy and a year earlier respectively. The growth of RMBsavings deposits fell for seven months in a row.

NewRMB deposits in August amounted to RMB228 billion yuan, with growth increasingby RMB7.5 billion yuan than a year earlier. In particular, household savingsdeposits increased by RMB23.6 billion yuan, RMB42.8 billion yuan less than thegrowth recorded a year earlier. New corporate deposits totaled RMB77.1 billionyuan, RMB8.9 billion yuan less than the same period of last year. New fiscal and institutionaldeposits were RMB81.6 billion yuan, accelerating by RMB55 billion yuanyear-on-year.

Foreigncurrency deposits rose by USD1.23 billion from a month earlier to USD154.9billion at end-August, accelerating by USD780 million on year-on-year basis.

4.     RMBinter-bank market transactions decreased, and the interest rates in inter-bankmarket remainedstable

Turnoverof RMB transactions in the inter-bank market declined by RMB80.9 billion yuanto RMB1.05 trillion yuan in August, RMB964.5 billion yuan less than the sameperiod of last year. Daily average volume totaling RMB47.7 billion yuan,decreasing by 7.1 percent compared with the previous month and decelerating by 50.3percent from a year earlier. Monthly-weighted average interest rates ininter-bank borrowing market averaged at 2.34 percent, 0.01 percentage points upover the previous month. Monthly-weighted average interest rates in pledgedbond repurchase market stood at 2.31 percent, 0.03 percentage points down fromthe previous month.

RMB exchange rate remained stable, beingat 8.2766 yuan per US dollar at the end of August.