Analysis Of China’s Excessive Money And Its Influencing Factors

Since the reform and opening up, China’s broad money (M2) showed a clear upward trend in stock. At the end of December 2014, the balance of broad money (M2) was 12.284 billion yuan, an increase of 11.01%. Since then, China has become the country of the world’s largest stock of money. By the end of 2014, China’s gross national product (GDP) was 636.5 hundred billion yuan. Compared to the gross national product, M2/GDP ratio was as high as 1.92, compared to the rate of which in 1978 was 0.32, which was a huge leap. The soaring of the stock of M2 and rising of M2/GDP ratio have indicated that China currently has a certain proportion of the monetary phenomenon. In order to explore the current currency over the existence of the state, and the influencing factors of the super currency, this paper analyzes the dynamic trend of core indicators to measure monetary excess release of M2/GDP, and thus reflects the economic implications, and gives the corresponding policy recommendations.For China’s current huge money stock level, the theory to explain it is showing different interpretations. From deepening monetary theory and the reform of the economic system in 1980s, and now the shadow banking, high savings and foreign exchange, debt burden theory, emerging in an endless stream of different economic theories. The changing trend of M2/GDP in China also shows the unique path of change, from the vertical perspective, China’s M2/GDP ratio has significantly increased in the long-term trend, and from the horizontal perspective, in the periodic trends and economic cycle reverse change. Though the world does not exist a unified measurment of the money stock level indicator, but based on the unified caliber approximation in different countries, we can also see the M2/GDP level of our country is at a high level in the world. The level of the money stock not only caused a great threat to the macroeconomic regulation and control to China’s economic operation, but also put forward a more severe test. At the same time, also made the corresponding requirements for further transformation and the reform of economic system in china. Therefore, this paper put forward the corresponding policy recommendations to promote further economic restructuring, improving the pension system and social security system, to change people’s consumption habits can also alleviate the current high stock M2 phenomenon in China fundamentally.The originality of this thesis are as follows:firstly, the data are practically new and the model combines different factors influencing M2/GDP, which is comprehensive and precise. Secondly, although M2/GDP is a good index when measuring M2, however, it has some defects that haven’t been solved. But the defects of this thesis are it doesn’t give a reasonable index to measure the level of M2.