China Added to Its Money Supply in 2022

News Analysis

China has apparently added trillions to the yuan. Money supply In 2022, it will be the largest in its history, equal to the sum from the United States, Japan and the European Union. The move might not have any effect on the Chinese economy. EconomyGiven a slow trend in GDP Experts recommend a drastic drop in the money circulation rates.

According According to data from People’s Bank of China(PBC), China’s M2, an indicator of money supply, has experienced a double-digit increase in growth since April 2022. The M2 had reached 266.43 trillion Yuan (about $38.78 Trillion), an 11.8 percent increase or 28.14 trillion Yuan ($4.096 Trillion) over the previous year.

M2, which is a type of broad money, measures the country’s money supply. This includes cash, savings deposits and money market securities. It can also be used to predict inflation.

However, this additional M2 as part of the PBC’s financial intervention was not as effective in stimulating economic development of the same magnitude as in the past.

According The Bureau of Statistics reported that China’s 2022 GDP was 121.02 billion yuan, which is roughly $17.62 trillion. This represents a 3 percent increase of 6.097 trillion or $887.48 trillion over the year before. This was the second-lowest growth in the last 30 years, after 2020 when COVID-19 broke.

So, China’s GDP growth was far below the country’s money supply growth for 2022.

Ma Jinghao, a Chinese tax expert, spoke February 9th. In a Weibo posting, China “printed” A total of 28 trillion Yuan (more than 4 trillion dollars) will be available in 2022. This amount is equivalent to the combined sum of the United States and Japan. China’s GDP, however, is only around 70% of that of the United States.

Ma cited U.S. economist Irving Fisher’s equation of exchange, MV=PQ, in which M = money supply, V = velocity of money, P = price of goods, and Q = quantity of goods and services—or, “money supply” Multiplied by “velocity of money” It is equal to “price level” Multiplied by “quantity of goods and services”—that is, the number of goods and services in China shrank seriously in 2022, prices rose slightly (not considering housing price decline), and the money supply increased dramatically, thus, based on the equation, the velocity of money would plunge, Ma said.

The money velocity is the rate at the which money circulates is used to buy goods and services. China is facing a problem with low money velocity.

On June 10, 2008, investors viewed a stock index at a Shanghai securities company. (China Photos/Getty Images)

Stock Market, Real Estate, and Funds

The Chinese stock market was showing signs of decline last year. The total market capitalization for A-shares was 84.85 billion yuan, or about $12.35 trillion. This is a decrease by 11.57 trillion (or roughly $1.68 trillion) since the start of the year. A shares fell by 16.21 trillion (or approximately $2.36 trillion). The per-capita stockholder loss would amount to 78,700 Yuan (approximately 11,000 dollars) with a midyear investor population at 206 million. This is according to Sina data from Chinese financial services provider wind.com.cn. reported December 31, 2022

The sales of housing were also low. The Bureau of Statistics Published Data shows that 2022 saw a decrease in commercial property sales to 13.33 trillion Yuan (roughly $1.97 trillion), and 4.86 trillion yuan (707.74 billion), respectively, compared to the same period last.

Additionally, the combined size of all funds, financial services trusts and other bulk funds was 94.78 trillion Yuan (about 13.8 trillion), a decrease of 1.03 trillion Yuan (about $149.92 billion) since 2022.

Where does the Added money supply go?

China has poured 28 trillion yuan ($4.096 billion) into the market throughout 2022. Is that where it went? Who took it?

Total resident deposits, According To data by the PCB It soared By 26.26 trillion Yuan (about 3.82 trillion), to reach 120.3 trillion Yuan (about $17.5 Trillion) by 2022.

New yuan loans have been added. The surge by 21.31 trillion yuan (about $3.1 trillion) in 2022, of which household loans were up 3.83 trillion yuan (about $557.5 billion) and enterprise and state entities loans were up 17.09 trillion yuan (about $2.49 trillion)—accounting for 80 percent of the total amount of loans.

According According to the Bureau of Statistics in the United States, the year-over-19 growth rate of fixed asset investment or state-owned holding investments, or fixed assets investment, increased to 10.1 percent in 2022 compared to 2.9 percent 2021. Private investment declined to 0.9 percent from 7 %.

In other words, state-owned, state-backed entities, organs, institutions, and institutions can borrow money at the bank. They then convert the deposits into deposits or pass it along to associated interest, who in turn deposit the money in banks. This creates a vicious cycle in which large sums of money build up in banks.

China’s Zero-COVID policy was enacted in 2022. It included billions of doses and full-staff nucleic acids testing. There were also large-scale makeshift hospitals, infrastructure, and other interest-related businesses that consumed astronomical amounts.

The ministry of Finance a href=”http://gks.mof.gov.cn/tongjishuju/202301/t20230130_3864368.htm”>confirmed National health spending due to the need of epidemic prevention rose to 2.25 trillion yuan (about 3227.5 billion dollars) in 2022. This is 17.8 percent more than the previous year.

Social Finance

There are structural issues that can be found within the PCB’s Report The size of social finance in 2022

First, while the money supply is strong and the demand for social finance is relatively low, the phenomenon known as capital idling, has increased. The growth rate for M2 has outpaced that of social finance stock since April last year.

Second, in 2022 the share of public finance in the credit market will continue to grow while private financing will continue to fall.

Public financing consisted of 4.04 trillion yuan ($580 Billion) of special bonds, 740 Billion Yuan ($106Billion) of policy-oriented developmental financial instruments, 800 billion yuan ($114Billion) of infrastructure loans. However, these large amounts of funds didn’t leverage private financing growth; instead, they led to a decrease in the multiplier effect, which increased debt burden and increased risks.

China’s credit money is essentially a wealth redistribution tool that favors the communist regime. The distribution of loans has been dominated by corporations and governmental bodies, with a low share of labor’s income that is comparable to countries like France, Germany, the United States, Korea, Japan, and the United Kingdom.

It was not possible to transfer the additional 28 trillion yuan ($4.096 billion) into the pockets of the people. Therefore, it will be more difficult for the regime achieve its goal of boosting the economy through money supply. A Jan. 29 report in NetEase Chinese portal site.