Study On Problems Of High M₂/GDP In China

Since China’s reform and opening up, the proportion of China’s broad money supply (M2) against gross domestic product (GDP) continue to rise, to the late20th century it has been on the top of the world, and this problem once received extensive attention of scholars both at home and abroad, but the ideas didn’t come to an unified conclusion. Since the2008financial crisis, China’s M2has rised from47.52trillion yuan to97.42trillion yuan at the end of2012, China’s money supply rised50trillion, the stock has doubled in four years. The rapid growth of the M2make a rapid rise of the proportion of M2/GDP, grow from31.8%(1978)to187.6%(2012), the growth is particularly striking. By2012, China’s M2/GDP is far higher than national level during this period, such as the United States (67.0%), the euro area (95.0%), UK (133.0%), Japan (174.0%), South Korea (147.4%), India (23.8%) and Thailand (117.4%), Indonesia (38.1%)and so on. Because no matter from the longitudinal or transverse comparison, China’s M2/GDP is high, many scholars did and are still doing corresponding analysis and research on the issue.Foreign scholars begin from theory, trying to find out the M2/GDP growth path and a reasonable level in the big scope. Domestic scholar’s research start from the domestic reality, trying to find our own special cause of the high M2/GDP. Should admit many factors in the financial and economic of our country lead to the fact that it is on the high side, but in the end to clarify this question, still should start from excess money. This article analysis the problems of higher M2/GDP in China from the perspective of the money supply and money demand equilibrium. Author thinks that the money supply and money demand is a two-way relationship, they influence mutually:information sent by money supply caused part of the money demand and further reversed transmission out corresponding money supply, it is a spiral propulsion mode. This kind of M2growth model, however, is more and more faraway from the real economy, so China’s M2/GDP continued to rise. This article attempts to analysis it from the two aspects of money supply and money demand for economic and financial result in money supply in the super reasonable and unreasonable factors of economic growth. Thus, put forward corresponding policy recommendations in view of the unreasonable factors.On the basis of the review literature scholars both at home and abroad, first this paper analyzed the cause of the high money supply from the points of view of the formation mechanism of the money supply, then moved to money demand angle behind the money supply, analyzed the microscopic economic subject in the process of monetization money demand structure and the change of intensity, this part mainly adopts qualitative and descriptive statistical analysis. And then through the empirical analysis to verify and further clarify ideas, to establish a lag term trend regression model to investigate the long-term trend of M2/GDP, then simply surveyed the M2/GDP economic cyclical fluctuation, and then introduced the virtual variable empirical products monetization and M2/GDP, the relationship between the capital factors finally verified monetization and M2/GDP.The results showed that high M2/GDP in China result from the money supply reasons and monetary demand reasons. Further credits, passive monetary growth and the basis of foreign exchange brought their excess reserves, cash leakage rate of decline caused by the money multiplier rising both from the aspects of money supply mechanism to promote the money supply growth. Prior to1996M2/GDP price elasticity is small, the excess money in China after1996and the relationship between the price be monetized capital factor market excess demand weakened.21st century capital market size and price changes is the main cause of M2/GDP rise, the market will be a strong currency demand, and absorb the excess money supply capital market bubble formation, monetary economy from real economy, the M2/GDP naturally rise. Based on the above conclusions in this paper, from the aspects of money supply and money demand put forward policy suggestions: improve foreign exchange management system, realize the two-way exchange rate floating; strengthen the commercial bank loan expansion monitoring and guidance; speed up the development of a multi-level capital market, encourage financial innovation; gradually improve the social security system, etc.