At what stage is the money supply in China mainly controlled? Is it M0, M 1 or M2? What is the reason?

M 1 refers to the narrow money supply, and the corresponding M2 refers to the broad money supply. The main control of money supply in China generally refers to m2.

The reason is:

Money supply is an important variable affecting macro-economy. It has a very important relationship with income, consumption, investment, price and balance of payments, and is an important basis for the state to formulate macroeconomic policies. The balance between total social demand and total supply, from the demand side, mainly depends on whether the money supply is moderate.

People generally divide the money supply into different levels to measure, analyze and regulate according to the size of liquidity. In practice, countries have different definitions of M0, M 1 and M2, but they are all classified according to liquidity. M0 has the strongest liquidity, followed by M 1, and M2 has the worst liquidity.

At present, China also divides the money supply into three levels, which means:

M0: cash in circulation, that is, cash circulating outside the banking system;

M 1: narrow money supply, that is, M0+ demand deposits of enterprises and institutions;

M2: money supply in a broad sense, that is, M 1+ time deposits of enterprises and institutions+savings deposits of residents.

In these three levels, M0 is closely related to consumption changes and is the most active currency.

M 1 reflects the change of the capital shortage of residents and enterprises, and is the leading indicator of economic cycle fluctuation, and its liquidity is second only to M0.

M2' s liquidity is weak, but it reflects the change of future social total demand and the pressure of inflation. Money supply usually refers to M2.

Therefore, M2 is the easiest to control, and its control is also the most effective.