China M2 = 2x GDP

SCMP:

Huang Qifan told a forum organised by the Chinese news organisation Caixin on Thursday that the People’s Bank of China had been releasing too much cash into the economy, leading to financial risks and asset price bubbles. Huang, a former mayor of Chongqing who survived a political storm in the city after his former boss Bo Xilai was toppled in 2012, is now a deputy director on the financial and economic committee at the National People’s Congress, a largely advisory role to the government.

The central bank’s forex management had had an impact on domestic monetary policy and led to a series of financial mess, Huang said, adding that the finance industry’s share in the economy was too large and China’s money supply volume was too big. As China’s broad money supply, M2, at $24 trillion, was twice as large as the country’s $12 trillion GDP size, it has driven property prices to rise eight-fold in the past decade and inflated the amount of large expenditure off company balance sheets.

US M2 is about $14 trillion and US GDP is around $20 trillion, so the US ratio is 70% versus 200% in China. There’s 3x as much money sloshing around in China versus the size of the economy. That doesn’t sound like a good thing, unless you’re trying to load up on debt of course.

Bonus: oddity of the day, in which we can say we’ve never seen the word emo, and we have no interest in starting now. Extra bonus, Harvard. Every day, low gets lower.

One Response to “China M2 = 2x GDP”

  1. Neil Says:

    M2 > GDP? That’s some impressive deflation.

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