Behind this seemingly economic boom, a shocking phenomenon has quietly emerged: although China's broad money (M2) balance has surged to nearly 300 trillion in just two years, showing an unprecedented over-issuance of money.
Instead, we are faced with a sharp contradiction – the country's finances seem to be on the verge of entrenchment, countless businesses are struggling with financial crises, and ordinary people's wallets are becoming more and more deflated.
This makes people ask: Where did the more than 50 trillion currencies go?
Over the past few years, our revenues have been challenged like never before. In the past, land sales were one of the important revenues, however, with the adjustment of the real estate market, this part of the income has decreased significantly.
At the same time, in order to stimulate economic growth, the policy of tax reduction and fee reduction has been implemented, which has reduced the burden on enterprises in the short term, but also further compressed fiscal revenue.
At the same time, spending on social welfare – including pensions, health care, and education – has been steadily increasing. This contradiction between declining revenues and increasing expenditures has put tremendous pressure on the fiscal sector.
The current economic environment is challenging for businesses, especially SMEs and private enterprises.
First of all, after a long period of the epidemic, the consumer market has shrunk, and people's willingness and ability to consume are much worse than before, resulting in sales difficulties and inventory backlogs for enterprises.
Second, the uncertainty of the global economy has increased, export orders have decreased, raw material costs have risen, and corporate profit margins have been further compressed.
Finally, the competition in the industry is becoming more and more fierce, especially in some traditional fields, where there are many competitors, profit margins continue to decline, and the survival space of enterprises is getting smaller and smaller.
The lives of ordinary people are also not optimistic. After three years of the pandemic, many people's incomes have been severely affected, and many people are facing unemployment or significant income reductions.
The cost of living, including rent, education, and medical expenses, is rising. This scissors gap between income and expenditure has left many families in financial distress and living under great pressure.
So, in the face of such a situation, where did the over-issued currency flow?
First, a large amount of money is used in financial markets, especially within the banking system, to repay debt and prevent the outbreak of systemic risk.
Although this part of the money flows within the banking system, it does not really enter the real economy, and it will do little to solve the financial difficulties, the shortage of corporate funds and increase people's incomes.
Second, a lot of money is trapped within the financial system, and due to market concerns about risk, this money is not flowing to the real economy, but is idling between financial markets in search of safe havens.
Finally, although some funds have flowed to key national projects such as infrastructure construction, the efficiency of the use of funds and the immediate pull effect of these projects on the real economy are still limited.
In the face of this complex situation, we can't help but ask, how can we make these over-issued currencies really play a role in helping the fiscal side ease the difficulties, the companies tide over the difficulties, and the people improve their lives?
This requires the joint efforts of policymakers, entrepreneurs and every citizen to improve the efficiency of capital use, stimulate market vitality through reform and innovation, and ultimately achieve stable economic growth and overall social prosperity.
In the face of the reality that over-issuance of money has not been an effective solution to the economic dilemma, we should not stop at the surface of the problem.
More effective policies and strategies must be implemented to ensure that these funds actually flow where they are needed, stimulate the growth of the real economy, and improve people's living standards.
The road ahead may be challenging, but if we can work together, wisdom and resilience will help us find a way to solve the problem and usher in overall economic and social prosperity.