Recently, China's M2, which is a broad measure of the money supply (including cash in circulation and bank deposits), underwent a change in how it is calculated, drawing some attention and discussion. This change doesn’t necessarily signify a dramatic event, but rather a technical adjustment in the methodology adopted by the People’s Bank of China. Such an alteration can affect how economists and investors interpret the figures, especially since M2 is an important indicator of the country’s economic health and monetary policy.
Looking at the most recent data, China’s M2 supply has shown steady growth, with a year-on-year increase of 7.3% in December 2024, compared to 7.1% in November of the same year. This growth reflects the continuation of economic stimulus policies, though the pace has been slower compared to historical peaks, such as the 29.7% recorded in November 2009. The change in calculation may have been implemented to better reflect the current economic reality, considering factors like financial digitalization or adjustments in deposit categories.
Moreover, the Chinese economy has been in the spotlight due to a slowdown in sectors like construction and the impact of domestic policies, making M2 a focal point for understanding how the government is managing liquidity. However, there isn’t a specific “event” like a crisis or collapse tied to M2 — the narrative seems more about technical adaptation than an isolated incident. If you’re interested in specific details of the new methodology, these aren’t yet fully clear in widely available public data, but it’s something analysts are closely monitoring.
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