Dec. 15 – China’s State Council has announced that it would increase money supply growth from 16 percent to 17 percent to stabilize the capital market and aid the slowing economy.

The new figure is 3 to 4 percentage points above the total growth of economic output and consumer prices. The measure comes three days after the Central Economic Work Conference in Beijing where policymakers discussed ways to to raise domestic demand as a way of coping with the crisis.

“Policy at the moment is generally being focused on boosting liquidity in the banking sector and making sure that it is used to fund investment in infrastructure projects,” Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA told China Daily.

The 30 measures discussed during the conference should compliment the government’s US$586 billion stimulus package that spans till 2010.

According to China Daily, the government’s other steps announced over the weekend include:

a. Aiming to achieve a loan growth of 4 trillion yuan ($586 billion) for all financial institutions and increasing the loan quota for policy banks by 100 billion yuan this year;

b. Suspending sales of three-year central bank notes and reducing sales of one-year and three-month bank notes;

c. Supporting enterprises to conduct mergers and acquisitions through the capital market, and allowing overseas banks to provide loans to domestic firms for the purpose;

d. Setting up futures for other commodities such as steel and grains; and

e. Asking insurers to expand insurance coverage to areas such as agriculture, cars, house purchase and short-term export credit.

For November, money growth in the country decreased from 16 percent in August to 15 percent because businesses and consumers scaled down their spending.