China's Money Supply Reaches a Record 240% of GDP

According to Haver Analytics, in the first quarter of 2026, China's M2 money supply—including cash and deposits—reached 240% of GDP, setting a historical record, far exceeding Japan's 185% and the U.S.'s 70%.
Since 2008, this ratio has risen by over 100 percentage points. This monetary expansion has supported stimulus policies, infrastructure construction, and manufacturing investment, but at the same time, inflation in China remains low, due to weak velocity of money circulation, which has fallen to a record low of 0.412; meanwhile, strict capital controls also trap funds within the domestic system.
Some believe these funds are invested in productive projects such as roads and railways, which is positive; but others warn that against the backdrop of lagging foreign exchange reserve growth and structural challenges, this could pose a risk similar to a "monetary time bomb."