Central Bank of China

PRESS RELEASE Release Date: July 25, 2002




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Financial Conditions (June 2002)

Monetary Aggregates For the month of June 2002, the annual growth rates of the monetary aggregates M1A, M1B and M2, measured on a daily average basis, were 10.93%, 20.37%, and 3.75%, respectively. The M2 aggregate plus bond funds held by the general public posted an annual growth rate of 6.09% for the month. M2 growth fell from the figure recorded in the previous month mainly due to the higher base of the corresponding month of the previous year, the decelerating growth of loans and investments, as well as the successively increasing demand for bond funds in place of bank deposits. For the first six months of this year, M2 exhibited an average annual growth rate of 4.26%. The rapidly growing bond funds not only partly replace bank deposits, but also increase the demand for bond and stimulate further direct finance activities, which will in turn limit bank's credit creation function and affect the M2 growth rate.

Direct and Indirect Finance At the end of June, the annual growth rate of total loans and investments in major financial institutions, including monetary institutions and the Postal Savings System, fell to "3.54% from "2.12% at the end of the previous month. The widened decline was mainly owing to the repayments of the Treasury's short-term borrowing from banks resulting in the decrease in banks' loans to government agencies by NT$ 58.5 billion, the decrease in banks' holdings of government bonds due to RP operations by NT$ 54.3 billion, as well as the decrease in securities financing by NT$ 19.3 billion. If loans and investments extended by life insurance companies and investment and trust companies, major financial institutions' reclassifying non-accrual loans and writing-off bad loans, as well as funds raised directly from financial markets were taken into account, the total funds raised by non-financial sectors showed an annual growth rate of 2.71% for the month.

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