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This amount is 1.5 times that of the United States, 4.9 times that of the UK, and 1.7 times that of Japan—surpassing the entire Eurozone by over 20 trillion yuan. What stands out even more is that most of this money was created in just the past two decades. In 2000, China’s M2 was only about 13 trillion yuan, and it hadn’t reached 50 trillion until 2008. After the global financial crisis in 2009, the money supply began to grow rapidly, crossing the 10 trillion threshold every year. In recent years, the growth has been even more pronounced.
Objectively speaking, this rapid increase isn’t due to one single department or policy, but rather the result of long-term imbalances in China’s economic development and a persistent trade and capital account surplus.
The sudden influx of massive liquidity into the economy has clear consequences. As we know, the U.S. dollar, as the world’s reserve currency, has caused serious problems globally due to its excessive supply. As former U.S. Treasury Secretary Connery once famously said, “The U.S. dollar is our currency, but it’s your problem.†Unlike the dollar, however, the renminbi hasn’t yet fully expanded beyond China’s borders. As a result, the large volume of money concentrated domestically increases the risks of economic instability. As Li Daokui, a former member of the central bank’s monetary policy committee, once put it, China’s massive money supply is like a dry lake on top of its head—too much can lead to inflation, asset bubbles, or capital flight.
In the medium to long term, the most worrying consequence is the growing trend of economic monetization in China. Currently, the ratio of M2 to GDP is close to 190%, a number that has been rising rapidly compared to previous years. This reflects a sharp decline in investment efficiency and signals that the old model of driving growth through capital is running out of steam. Relying solely on monetary expansion is no longer sustainable. It’s time for a new approach to ensure long-term economic health.
China’s currency stock is facing the highest risk in the world
Abstract According to data from the People's Bank of China, by the end of last year, China’s broad money (M2) balance had reached 97.42 trillion yuan, and it's almost certain that it will soon surpass 100 trillion yuan. This figure accounts for nearly a quarter of the world’s total money supply, making it no exaggeration to say that China has become the largest currency stock in the world.