China is to increase its money supply by 17 percent in 2009

Reuters announced that China plans to increase its money supply by 17 percent in 2009. This decision was made by the country's cabinet in order to improve financial conditions and to prove the status of the world's-largest economy. Even though the directive was made by the State Council on December 8, it was posted on the central government's website late on Saturday. The top financial leadership aimed to respond the domestic demand and took some measures for stimulating the economy that has been slowing down due to the global financial crisis. And a 4 trillion yuan ($586 billion) stimulus package was announced last month. 

One of the measures taken is to make the central bank stop issuing three-year bills and reduce its issuance of one-year and three-month bills, providing more liquidity in the financial system. 
As the cabinet commented in details those financial steps are made for further implementation of the active fiscal policy and appropriately loose monetary policy. Also it is planned to expand the support of the financial sector and promote stable, rapid economic growth. 

Among other measures mentioned by the State Council are long-standing commitment to make the yuan's exchange rate more flexible, a series of capital market innovations such as launching new types of steel and grain futures and expanding the corporate bond market, launch of NASDAQ-style start-yup boards on a pilot basis and others. 

Moreover, in order to encourage the representatives of financial area Chinese government offers some benefits. It provides the support for loan guarantee companies, including exempting the, from some taxes, guides more lending to small-and medium-sized enterprises, improves foreign exchange rules, etc. And the same time banks are advised to do a good job of balancing their roles in boosting economic growth and should be competent against risks during an economic downturn.