While the stimulus conducted in the U.S. has been a hotly debated topic most Americans are unaware that Chinese stimulus spending has outpaced the U.S since 2009. The People’s Bank of China has been stimulating the economy by issuing more renminbi, the official currency of China, and then buying dollars in currency markets to slow the renminbi’s appreciation against the dollar. By minimizing its currency’s appreciation China is keeping its exports inexpensive and keeping its trade surplus high. However, a worry of this strategy is the asset bubble that has been created, especially with regard to real estate.
The money supply has tripled since 2006 as measured by M2 the , increasing by 30% in 2009 and by 13.6% in the past year. In comparison the inflation adjusted growth rate is 7.6%. Economists worry how the central bank can slow the growth of money supply without causing a slump in real estate. At the same time real estate has become extremely expensive in and around cities so that young people entering the work force have found that it will be impossible for them to purchase a home. In the next few years a fierce policy debate will go on between need for growth and investment and the need to slow the asset bubble.