China’s Money Supply Surpasses Both the US and EU Combined

Professor of finance and economics warns that China could fall into a liquidity trap.

A clerk counts stacks of Chinese yuan and U.S. dollars at a bank in Shanghai, China, on July 22, 2005. China Photos/Getty Images

China’s latest official figures show that by the end of Feb., the country’s broad money supply (M2) balance reached 299.56 trillion yuan ($42.16 trillion). This figure is higher than the money supply in both the United States and the European Union (EU) combined.

M2, or broad money supply, is calculated by adding the total amount of currency in circulation, the demand deposits, and the time deposits.