Chinese Economy and Excess Liquidity

Yuanquan Chen

China & World Economy, 2008, vol. 16, issue 5, 63-82

Abstract: This paper considers five indicators of excess liquidity to verify its existence in China. Based on the analysis, we argue that the People's Bank of China and other banks in China are responsible for the excess liquidity in China. Other factors, such as the excess savings resulting from the poor social security network, the asset bubble and the foreign exchange system, fuel banks with abundant liquidity. To tackle the problem of excess liquidity and direct capital into productive sectors, the traditional use of monetary policy alone is not sufficient. The semi‐administrative tool “window guidance” and other macroeconomic control methods are required.

Date: 2008
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