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China’s Central Bank’s Increased Issuance of RMB Leads to Domestic Inflation

According to Beijing News, the People’s Bank of China (China’s central bank) ranks No. 1 in assets in the world and last year printed money equal in value to half of the total currency printed in the world. The latest statistics released by the central bank show that, as of February 2012, its assets reached 28,330 billion RMB (about $4,500 billion), surpassing the U.S. Federal Reserve Bank and the European Central Bank. In the past five years, its assets increased by 119% and M2 by 146%. Due to the exchange control and the fact that the RMB is not an international currency, the increased RMB circulated only inside China. Thus those in China bore the full inflationary impact. “China is way behind the United States in terms of total GDP, economic power, personal income, and the overall wealth of the country. In 2011, the ratio of China’s M2 to GDP reached 189% while the ratio of M2 to GDP in the U.S. was about 64%. This showed the power of the RMB to boost inflation.”

Source: The Beijing News reprinted by Xinhua, April 24, 2012