At present, China also divides the money supply into three levels, namely: M0: cash in circulation, that is, cash circulating outside the banking system; M 1: narrow money supply, that is, M0+ demand deposits of enterprises and institutions; M2: money supply in a broad sense, that is, M 1+ time deposits of enterprises and institutions+savings deposits of residents. In these three levels, M0 is closely related to consumption changes and is the most active currency. M 1 reflects the change of the capital shortage of residents and enterprises, and is the leading indicator of economic cycle fluctuation, and its liquidity is second only to M0. M2' s liquidity is weak, but it reflects the change of future social total demand and the pressure of inflation. Money supply usually refers to M2.
According to the classification of the International Monetary Fund, the money supply can be divided into:
M0 (cash): refers to the cash circulating outside the banking system, that is, the cash in the hands of residents and the reserve fund of enterprises, excluding the cash on hand of commercial banks. M 1 (narrow currency): M0 plus commercial bank demand deposits. M2 (broad money): It consists of M 1 plus upper quasi-money. Quasi-currency consists of bank time deposits, savings deposits, foreign currency deposits, bank acceptance bills, short-term treasury bills and other short-term credit instruments.
According to the classification standard of the International Monetary Fund, the level of money supply in China is divided as follows: M0= cash M 1=M0 demand deposits M2=M 1 savings deposits of urban and rural residents and other deposits M3=M2+ commercial bills+large negotiable certificates of deposit. Although the currency of money supply is not completely determined by the government (central bank), it is not completely equivalent to paper money printed by the government.
This is the explanation of M 1 and M2.