Translated Abstract
Economic monetization, the proportion of goods and services purchased by money in a country’s national economy to its total output and the process of its change, is usually measured by the rate of monetization M2/GDP. The monetization rate has a significantly positive correlation with the economic development of a country. In recent years, China＇s monetization rate has been climbing all the way. In 1996, it broke the 1.0 mark, surpassing 2.0 in 2015 and reaching 2.08 in 2016. Not only has it far surpassed developing countries, but it has also surpassed developed countries. This is not in line with China’s economic development seriously. With the continuous increase in the monetization rate, the overall payment risk will increase. The potential inflation and asset price bubbles will adversely affect the macro economy and national welfare. Only through investigating the main causes of this phenomenon can take targeted measures to avoid these risks.
In this paper, based on summarizing relevant literature, we will conduct an international comparison of China＇s monetization ratio to deepen the status quo, and then use a combination of theoretical analysis and empirical research. When the savings rate of Chinese residents increases by 10%, the monetization rate increases by 8.12%. When the currency circulation rate drops by 10%, it increases by 9.78%. When the national debt rate increases by 10%, it increases by 8.38%. When the income gap between residents increases by RMB 1,000, it increases by 2.7%. At the same time, we combine the development path of the monetization rate in the developed countries with the status quo of high monetization rates in China, and predict that the monetization rate in China will continue to rise in the future.
According to several major factors that have led to a high monetization rate in China, this paper proposes to speed up the development of the capital market, open up diversified investment channels to reduce the level of M2, strengthen the reform and supervision of the financial market, and prevent the continuous increase of non-performing assets to increase the circulation of money. Adopt various measures to reduce foreign exchange purchases to reduce the passive delivery of money, multi-pronged control of poor income, increase the overall consumption and investment level of the whole society to improve GDP growth.
Translated Keyword
[circulation speed, foreign exchange reserves, income gap, Monetization rate, savings rate]
Corresponding authors email
