China's M1 Surge: Methodology Shift, Not Liquidity Injection
1min read China's M1 Money Supply Data Misinterpreted, Analysts Clarify
Speculation has been rife on Crypto Twitter following the circulation of a chart showing a 67.59% jump in China's M1 money supply. Many interpreted this as evidence of an unprecedented liquidity injection by the Chinese government. However, financial analysts have clarified that the surge is due to a change in measurement methodology, not an actual increase in circulating money.
The chart, sourced from TradingView, shows China's M1 money supply jumping from approximately 67 trillion yuan to 112.45 trillion yuan virtually overnight. This led to speculation that the Chinese government had injected massive liquidity into the financial system, potentially impacting global markets, including cryptocurrencies.
Financial analysts quickly debunked these claims, pointing to an official announcement made two months ago by Chinese authorities. The surge in the chart reflects an expanded scope in how M1 money supply is measured, not a sudden increase in available cash. This data adjustment likely reflects reclassified deposits and may also include other financial instruments previously left out of the calculation.
Macro analyst Benjamin Cowen weighed in on the trend online, pointing out that many people misinterpreted the chart, believing China had suddenly doubled its money supply. He emphasized that this was not the case and that the change was due to a previously announced expansion in the scope of the metric. Cowen expressed his frustration with the lack of critical thinking and criticized the spread of misleading narratives on Crypto Twitter.
A commenter under Cowen's post provided further clarification by sharing details of the People's Bank of China's (PBOC) updated M1 formula, introduced in January 2025. The new calculation now includes currency in circulation, which consists of physical cash outside the banking system and demand deposits. It also incorporates personal demand deposits, which are funds in individual checking accounts, and prepaid funds held by non-bank payment institutions, such as balances in digital wallets or prepaid accounts managed by entities like Alipay and WeChat Pay.
Other analysts emphasize the importance of verifying official sources and understanding the context behind financial data before jumping to conclusions. They stress the need for critical thinking and thorough analysis when interpreting financial metrics.
