Excess Currency Issuance and Inflation in China

In China, the monetization ratio (ratio of money to GDP) has been high for quite a number of years but price increases have been relatively mild. The price rise for food products is the major factor for this round of inflation; another factor is the price fluctuations for international resources; and a more profound cause is the imperfect and stagnating domestic market reforms. Therefore, to some degree, the fundamental cure for inflation will be determined by the size and speed of the transformation of the domestic resource market from the planned economy to the market economy.

Contents

I. HISTORY SHOWS THAT HIGH MONETIZATION RATIO IS NORMAL.

II. PRICES ARE STABLE EVEN WITH A HIGH MONETIZATION RATIO.

III. IMPERFECT AND STAGNATING MARKET REFORMS AND INFLATION.

IV. LASTING POLICIES TO CURB INFLATION Skip to top