rapidly. over - investment has put strains on the supply of energy and transport and boosted excessive growth of money and credit. in the first quarter of 2004, broad money m2 grew by 19. 1 percent, and new loans issued by the financial institutions surged by 20. 7 percent over the corresponding period of last year, all beating the projected macro - control targets. in the meantime, the price level, in particular the prices of production materials and raw materials, experienced fast rise. the price of industrial production materials rose by 3. 6 percent in 2003 and continued to grow by 4. 8 percent in the first quarter of this year. the chinese government has attached great importance to resolving the emerging problems in the economic operations, and is taking comprehensive measures to bring them under control. in line with the decisions made by the state council, the people ’ s bank of china has consistently improved financial management and applied various monetary policy instruments to adjust the monetary and credit aggregates and their structures, so as to prevent inflation and ups and downs of the economy. measures taken by the people ’ s bank of china include : • strengthening open market operations to fully sterilize liquidity increase resulted from foreign exchange purchase in the market ; • preventing excessive growth of money and credit through raising the requirement reserve ratio further by 0. 5 percentage points from 7 percent to 7. 5 percent based on the 1 percentage point hike in 2003 ; this action froze usable fund of the financial institutions totaling rmb110 billion yuan ; • establishing positive incentives to introduce differentiated required reserve ratios for different financial institutions. the required reserve ratio applied to a financial institution will be linked to its performance indicators such like capital adequacy ratio and asset quality. the lower the capital adequacy ratio of a financial institution and the higher its npl ( non - performing loan ) ratio, a higher required reserve ratio will be charged. the differentiated required reserve ratio system is a special institutional arrangement based on the current financial system in china and will benefit monetary policy transmission ; • floating central bank lending rates. interest rates of central bank loans at various tranches were increased by 0. 63 percentage points and the rediscount rate was also raised by 0. 27 percentage points ; • increasing window - guidance on loan extension for commercial banks. risks have been warned for commercial banks and efforts were made to promote loan structure improvement and the establishment of loan restriction mechanism consistent with risk control capability and capital adequacy in the commercial banks. while controlling credit fund

##ing operations over the life of the respective tltro. for banks whose eligible net lending exceeds a benchmark, the rate applied in tltro iii operations will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation. the maturity of the operations will be extended from two to three years. fifth, in order to support the bank - based transmission of monetary policy the governing council decided to introduce a two - tier system for reserve remuneration in which part of banks ’ holdings of excess liquidity will be exempt from the negative deposit facility rate. separate press releases with further details of the measures taken by the governing council will be published this afternoon at 15 : 30 cet. the governing council reiterated the need for a highly accommodative stance of monetary policy for a prolonged period of time and continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry. 1 / 3 bis central bankers'speeches today ’ s decisions were taken in response to the continued shortfall of inflation with respect to our aim. in fact, incoming information since the last governing council meeting indicates a more protracted weakness of the euro area economy, the persistence of prominent downside risks and muted inflationary pressures. this is reflected in the new staff projections, which show a further downgrade of the inflation outlook. at the same time, robust employment growth and increasing wages continue to underpin the resilience of the euro area economy. with today ’ s comprehensive package of monetary policy decisions, we are providing substantial monetary stimulus to ensure that financial conditions remain very favourable and support the euro area expansion, the ongoing build - up of domestic price pressures and, thus, the sustained convergence of inflation to our medium - term inflation aim. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp increased by 0. 2 %, quarter on quarter, in the second quarter of 2019, following a rise of 0. 4 % in the previous quarter. incoming economic data and survey information continue to point to moderate but positive growth in the third quarter of this year. this slowdown in growth mainly reflects the prevailing weakness of international trade in an environment of prolonged global uncertainties, which are particularly affecting the euro area manufacturing sector. at the same time, the services and construction sectors show ongoing resilience and the euro