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Chinese Economist: Easy Monetary Policy Has Little Effect on Economic Growth

At a China Entrepreneurs Forum held at Yabuli, Heilongjiang Province from February 16 to 18, Wang Xiaolu, an economist at the National Economic Research Institute under the China Reform Foundation, commented on the effectiveness of China’s monetary policy.

Wang recalled the history from 2000 to 2018, with an observation that China’s real GDP increased by 3.8 times, but M2, a key measure of money supply, grew by 12.6 times. “China’s easy monetary policy didn’t start from 2008, but has been there for a long time. The growth of money is much higher than the growth of GDP.”

“The long-term monetary easing has brought about the series of structural problems that the Chinese economy now faces.” Wang said that one of the serious problems is the ever-rising debts. In addition, due to excessive investment, including the government’s investment in urban expansion and infrastructure construction, many projects are economically inefficient. Wang is concerned that a considerable part of the investment is ineffective. “It is a waste.”

Although the officially published GDP growth rate is 6.6 percent, Wang believes “the real situation is much worse.” “The easy monetary policy has become less and less effective in stimulating economic growth. It is almost nonexistent now, but the negative effect is very obvious. The money oversupply will rush into real estate, causing a housing bubble and introducing other problems”.

Source:, February 17, 2019