Research About Impacts Of Industrial Structure On M2/GDP

Since the reform and opening up, the ratio of M2/GDP in China presents a sustained stable growth, which arouses wide attention from many scholars. In 1990s most scholars attributed high ratio of M2/GDP to the rising monetary level of our country. However, with the boosting trend of marketization and the end of monetization, the ratio of M2/GDP was still high and rising, scholars began to seek for other reasons from various aspects and a series of theories formed. The ratio of M2/GDP tended to decrease since 2004, then began to rise from 2009. Especially after the fourth quarter of 2010, commodity prices, housing prices and GDP continued to rise, and "currency over-issuing" had become a hot spot. It seems to not be reasonable to reach a conclusion of currency over-issuing, only just because of the high ratio of M2/GDP. This paper will give an explanation of the high ratio of M2/GDP from the perspective of the changes of China’s industrial structure and national economic accounts.Firstly, this article analyzes the current status of monetization process and industrial structure. Then, it continues to analyze the social reproduction theory of Marx, national economic accounting theory, alteration of industrial structure and demand for money linkage theory. The different industrial structure has different organic structure of capital; only variable capital and surplus value are recorded in national economic accounting; money as circulating medium is needed if only the commodity production process but also the circulation process. Therefore the high ratio of M2/GDP is relationship with the industrial structure. Next, on theory analysis basis, this article uses the time series in China from 1978 to 2014 for empirical research. The results show that the primary industry in China has significant negative effect of M2/GDP and the tertiary industry has significant positive effect of M2/GDP. We argue that the current situation of industrial structure in our country is one of the reasons for the high ratio of M2/GDP, so we can’t simply come to the conclusion of currency over-issuing.