Study On Excess Liquidity In China

Imbalance in the international balance of payments and excess liquidity are the main problems which china microeconomics faces presently, lasting double surplus brings huge liquidity to china, leads obvious inflation and asset price bubbles. This paper shows that, as a developing country, outputting capital to the developed countries constantly is an abnormal phenomenon for china. There are three reasons for this phenomenon, the first is the international currency system under the Jamaica system did not change that under the Breton system, the countries other than the United States need to accumulate Dollars through current account surplus for international economic contact; the second reason is that some countries especially in east Asia choose the export-oriented economic development strategy which base on the premise that the United States supplying huge current account deficit; The third reason which is also the core of this paper is that the low efficient financial system of China under the background of financial restraint prejudices the savings translating to the investment, parts of the final products which can not be absorbed by the domestic demand can only be transmit to the foreign countries(mainly the United States). This creates the strange phenomenon that the developing countries supply loads to the developed countries. The first chapter of the paper introduce the research back ground of this paper, then give the literature review. The second chapter give the general summery of liquidity and the measure method of excess liquidity. In chapter three we analysis the direct reason and the in direct reason of excess liquidity in China from the point of the central bank's balance sheet. In chapter four we reviewed the classic Keyes' related theory and finance restraint and deepening theory, then point out that the deep reason of China's excess liquidity is that under the finance restraint background, China's save can not be easily translated into domestic investment, but pushed to the export sector, turned into huge surplus under the current account. In chapter five we gave our analysis for China's macro economic policies in recent years. In the last chapter we gave the suggestions.