In recent discussions, there has been a lot of concern about the possibility of a super-inflation in 2024. The logic behind this is based on an analysis of domestic and foreign monetary policy, especially given the combined effect of China's M2 growth and U.S. interest rate cuts. Observers worry that this internal and external situation could lead to a surplus of money, which could push up prices.
In 2023, China's M2 reached 29227 trillion yuan, a year-on-year increase of 97%, compared to 266 at the end of 202243 trillion yuan, a year-on-year increase of 118%。This means that in the past two years, China's M2 has increased by nearly 54 trillion, with a cumulative growth rate of 2265%。At the same time, a sharp interest rate cut in the US dollar is expected to unleash up to $8-10 trillion of funds seeking investment opportunities on a global scale, potentially leading to excess liquidity.
China has made a strategic response to fears of super-inflation in 2024. First of all, it needs to be understood that the huge domestic M2 increment in the past two years has been mainly absorbed by the real economy. The report of the People's Bank of China pointed out that credit will maintain rapid growth in 2023, and financial support for the real economy will be strong. This means that although the role of real estate and the "reservoir" of the real estate industry has weakened, the funds have been effectively guided to the real economy, especially industrial clusters such as high-tech and advanced manufacturing, which has provided impetus for China's economic development and industrial upgrading.
In addition, China has adopted a new strategy of opening up the financial sector, such as easing controls on foreign banks and insurance companies, which not only helps attract foreign capital, but also provides a new "reservoir" for the reception and use of foreign capital, rather than allowing it to flow into the market in a disorderly manner. The logic behind this strategy is to ensure that capital flows can support economic development and control inflation risks through precise supervision and guidance.
As a result, China's policymakers have shown foresight and resilience in the face of a complex internal and external economic environment. By optimizing capital flows, supporting the real economy, and innovating in financial regulation, China is trying to turn potential inflation risks into new drivers of economic growth. The implementation of this strategy means that although there may be fluctuations in real estate and prices, through effective management and regulation, the threat of large-scale inflation can be avoided and the overall stability and healthy development of the market can be maintained.
In this process, we are not only looking forward to a smooth economic transition, but also focusing on how to lead China's economy into a new growth cycle through innovative and open policies. In the next two to three years, with the in-depth implementation of these strategies, China's economy will take off again, which will be the focus of close attention of global economic observers. Kunpeng Project