Weak demand is dragging down China's economic growth. The real problem isn't a shortage of money: the broad money supply (M2) now exceeds CN￥155 trillion ( trillion), or 200% of GDP, and continues to grow by 12-13% annually. Rather, the current slowdown reflects financial constraints on the real economy – a problem that will be difficult to reverse in the near future.完美世界txt精校版完整 媒体晒图比较鲍尔和库里、威少等人夏联数据
As the money supply and financial sector expanded, so did the shadow banking system, which operates beyond the reach of risk-mitigating regulation. According to data from Moody's Investors Service, by the end of last year, credit from China's shadow banking system had nearly tripled relative to 2011, to CN￥65 trillion. Since 2006, shadow banks’ share of total credit soared from 10% to 33%.
Ironically, these financial constraints have tightened against a background of strong financial-sector growth. Indeed, it is the financial sector's prosperity, driven partly by the success of market-oriented innovations, that has fueled growth in China's M2 and credit assets.完美世界txt精校版完整
This trend can be traced back at least to 2004, when a fast-growing trade surplus and massive capital inflows, as well as relentless exchange-rate appreciation, forced the People's Bank of China (PBOC) to resort to monetary expansion as a hedge against the resultant risks. Since then, China's unremitting investment in infrastructure and real estate has fueled domestic demand, absorbing and reinforcing this credit growth. In 2009, China took things a step further, with a massive three-year stimulus plan that expanded bank credit to more than CN￥20 trillion.完美世界txt精校版完整完美世界txt精校版完整
The risks generated by these activities are not lost on the Chinese authorities. The newly appointed chair of the China Banking Regulatory Commission (CBRC), Guo Shuqing, has pledged to look more closely at banks’ off-balance-sheet activities and conduct a rigorous audit of their risk assets. In the meantime, China's securities and insurance regulators have cracked down on activities like hostile takeovers.张军：China's Monetary Conundrum Tweet
But the truth is that a regulatory crackdown, while necessary to mitigate financial risk, will not resolve China's monetary conundrum, much less protect China's economy from the consequences of a financial crisis in the long run. For that, China will need to identify and encourage those financial innovations that can support real economic activity. Unfortunately, on that front, not nearly enough progress has been made.完美世界txt精校版完整