The Research On The Ratio Of M₂/GDP In China Since The Reform And Opening

Since the reform and open policy began in 1978, the ratio of M₂/GDP in China presents the trend of escalation continuously. It grew from 0.32 in 1978 to 1.98 in 2005. Such growth situation was unprecedented in the various countries economical history. The attitude of theorists and decision-makers to M₂/GDP has transformed from the affirmation of the fast marketability and the monetization performance in 1990's into the concern regarding the reason of the growth of the ratio which involved the system problems and the high financial risk in China's economy. The economist has produced own explanation from each kind of angle. In a framework of monetary economics, M₂/GDP contains the functional relationship between the national income and the money supply and demand. Its level and the change is decided by the money demand, and at the same time reflects the fact of money demand level's rising unceasingly. Except that outside long-term trend, China's M₂/GDP also assumes the counter cyclical change tendency. The reason lies in the money demand which causes by the discrete motive have the characteristic of counter cyclical undulation. In the worldwide scale, China is one of the countries (areas) with quite high M₂/GDP, but the nationality comparison indicated there is no standard level of M₂/GDP among the various countries (areas).In the past more than 20 years, China's M₂/GDP has escalated rapidly. The reasons for that are: from the angle of money structure, the ratio of Quasi-money/GDP has been rising rapidly; from the angle of economy, the inhabitant income and payout has changed greatly during the economy transformation, the inhabitant savings ratio has been comparative high due to the incompletely necessary reform, the financial market has been developing so slow and there has been some passive scale in monetary policy operation. As the essential reason of the rapid growth ofM₂/GDP is the institution changes during economy transformation, it must be resolved comprehensively from the angle of deepening the reform. This article has analyzed this system vicissitude from the angle of money supply and demand, proposes a motive model on M₂/GDP growth and from the macroscopic angle analysis circulation...