January 18, 2013 5:08PM 

# China: Money Matters 

By [Steve H. Hanke](https://www.cato.org/people/steve-h-hanke) 

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Contrary to what the doomsters have been telling us, China’s economy is not on the verge of collapse. As the *Wall Street Journal*’s man in Beijing (and my former student), Aaron Back, reported: “[China’s economic growth accelerated in the fourth quarter of 2012](http://online.wsj.com/article/SB10001424127887323468604578248491257898414.html).” Indeed, China’s fourth quarter GDP growth rate came in at a strong 7.9%.

What the doomsters and many other Pekingolgists fail to grasp is that money matters. Indeed, [it dominates fiscal policy](https://www.cato.org/publications/commentary/wrong-way-krugman-flies-again-again-4), and nominal GDP growth is [closely linked to growth in the money supply – broadly measured](https://www.cato.org/publications/commentary/basels-capital-curse).

China’s most recent acceleration in GDP growth did not catch me flatfooted, because China’s money supply has been surging (see the accompanying chart).

![Media Name: 201301_blog_hanke181b.jpg](/sites/cato.org/files/styles/pubs_2x/public/images/201301_blog_hanke181b.jpg?itok=ResfUza-) 

In fact, China’s M2 money supply measure is 9.7% above the trend level. Money matters.

##### Related Tags 

[China](https://www.cato.org/china) 

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