Controlling China’s Currency
China is stuck in a currency-creating cycle: GDP growth encourages investment, which boosts demand for capital, creates liquidity, and stimulates further GDP growth. The key to controlling the money supply is to prevent the government from becoming a second currency-creating body.
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BEIJING – It is indisputable that China is over-issuing currency. But the reasons behind China’s massive liquidity growth – and the most effective strategy for controlling it – are less obvious.