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Chinese Economy and Excess Liquidity

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  • Yuanquan Chen

Abstract

This paper considers five indicators of excess liquidity to verify its existence in China. Based on the analysis, we argue that the People's Bank of China and other banks in China are responsible for the excess liquidity in China. Other factors, such as the excess savings resulting from the poor social security network, the asset bubble and the foreign exchange system, fuel banks with abundant liquidity. To tackle the problem of excess liquidity and direct capital into productive sectors, the traditional use of monetary policy alone is not sufficient. The semi‐administrative tool “window guidance” and other macroeconomic control methods are required.

Suggested Citation

  • Yuanquan Chen, 2008. "Chinese Economy and Excess Liquidity," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(5), pages 63-82, September.
    • Handle: RePEc:bla:chinae:v:16:y:2008:i:5:p:63-82
    DOI: 10.1111/j.1749-124X.2008.00130.x
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    References listed on IDEAS

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    Cited by:

    1. Huang Yiping & Wang Xun & Hua Xiuping, 2010. "What Determine China’s Inflation?," Macroeconomics Working Papers 22770, East Asian Bureau of Economic Research.
    2. Bui, Duy-Tung & Nguyen, Canh Phuc & Su, Thanh Dinh, 2021. "Asymmetric impacts of monetary policy and business cycles on bank risk-taking: Evidence from Emerging Asian markets," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    3. Thai V. H. Nguyen & Agyenim Boateng & Tra Thi Thu Pham, 2019. "Involuntary excess reserve and heterogeneous transmission of policy rates to bank lending rates in China," Empirical Economics, Springer, vol. 57(3), pages 1023-1044, September.
    4. Veríssimo, Pedro & de Carvalho, Paulo Viegas & Laureano, Luís, 2021. "Asymmetries in the Euro area banking profitability," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    5. Chih‐Hsiang Chang & Kam C. Chan & Hung‐Gay Fung, 2009. "Effect of Money Supply on Real Output and Price in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(2), pages 35-44, March.
    6. Nguyen, Vu Hong Thai & Boateng, Agyenim, 2015. "Bank excess reserves in emerging economies: A critical review and research agenda," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 158-166.

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