Suggested Choices for the Path to Eliminate Excess Liquidity in China

This paper has defined excess liquidity as lack of transaction ability of financial assets. From this perspective, the author points out that current excess liquidity in China is originated from the internal and external disequilibrium of economic structure, and that current policies aiming at eliminating excess liquidity take little effect because they put too much focus on the gross control. Thus, it is better to "dredge" rather than to "stifle" liquidity. Only by changing from passive gross control to active structural adjustment can we achieve benign interaction between economy and finance, and thus branch off the current excess liquidity in China and fully utilize it as well.