On China's Excess Liquidity As Well As Countermeasures

Since 1949, and even during the early stage of reform and opening up policy, the lack of liquidity is an important factor which has been restricting China' s economic development. In essence, is an insufficient fund. However, as China' s high-speed economic growth and the accumulation of the trade surplus in recent years, this situation has been reversed. On the other hand, excess liquidity has occurred quietly. Under the promotion or RMB revaluation and excess liquidity, A new phenomena comes up that RMB exchange rate has gone down but the domestic price has gone up in recent years. In the face of this new phenomenon, our government also actively launched many strategies. For example, to recover liquidity , in 2007 the People' s Bank of China has raised the statutory reserve ratio, raising interest rates for deposits and loans, issuing central bank bills and treasury bonds, and so on some special mean. The positive response to the situation of excess liquidity of the government and the central bank has played a role in mitigation, but results are not very clear. Academics against the current excess liquidity situation also have good advice and put forward their own proposals and measures. Based on our present situation of excess liquidity, the article collates the information and makes some suggestions based on the exploration and study of the indicators, the cause and the impact of excess liquidity.This paper is divided into seven parts, the first chapter describes the background of excess liquidity and its great practical significance to China' s economic. Then it gives a literature review which is about the recent scholarly research on the problem of excess liquidity. The writing idea is like this: on the basis of the concept of liquidity and excess liquidity, the paper presents four indicators to make a judgment of excess liquidity, including monetary excess supply, the excess reserve rate at high level, the wide gap between deposit and loan and high savings rate. And also it discusses on China' s current economic operation of the problem of excess liquidity. Through the performance of excess liquidity in the market price and empirical analysis, in-depth analysis of the excess liquidity in China' s economic operation in the cause, coupled with the excess liquidity of the international inspection, the paper analyzes the economic effects on China (including its beneficial effects and adverse effects), and proposes some measures to deal with excess liquidity. And these measures are made from four aspects, which is the central bank' s monetary policy, expanding the channels of overseas, improving the RMB exchange rate mechanism and financial markets economic reforms.