High Foreign Exchange Reserves Fuel Excess Liquidity

This article views China’s excess liquidity problem in the global context. It suggests that market mechanisms, cooperation between all parties involved, and liquidity diversion, be resorted to in order to tackle the problem of excessive liquidity. This article also points out that the top priority is to solve the major problems, such as the current account surplus, the sources of excessive liquidity, the shortage of capital in rural areas, and the cause of capital distribution imbalance.