Analysis Of The Chinese Endogenous Money Supply

By analysing the Chinese money supply, I find that it isn't completely controlled by the central bank, but it depends on the economic factors, and it is an endogenous variable. Before 1997, it was decided by the excessive demand for currency of enterprises and commercial banks, and the growing number of foreign exchanges that Chinese government held was also a prime factor. But from 1997, the growing speed of the supply has become much slower, and deflation has appeared. The basic cause lies in the absence of consumption and investment. In addition, the financial market doesn't meet the economic needs is also an important factor. So, we must take measures to encourage people to consume and encourage enterprises to invest, and we must better the financial market. Only by those means can we cope with the problem of currency.