This book is the final report of the major bidding project of the National Social Science Foundation of China "Research on China's Money Supply Mechanism and Future Inflation Risk" (project approval number: 09&ZD036) of which Wang Guogang is the chief expert. After the project was issued, the research group seriously carried out the research work of the project in accordance with the content requirements of the project application plan and the "project approval notice". In about two years, the research group has held 6 research group research meetings to conduct in-depth discussions on the research scope, research content, research ideas, research methods and research difficulties involved in this topic, and at the same time, held 5 public seminars on the key issues involved in this topic, and held 5 public seminars on the key issues involved in this topic, the Institute of Finance, Chinese Academy of Social Sciences. In the process of research, the members of the research group actively and conscientiously, with a scientific and rigorous attitude and the spirit of pragmatism and truth-seeking, carried out scientific research work such as data collection, field research, data processing, research group discussion and first draft writing, and by November 2011, the first draft was basically completed. In the process of project research, the members of the research group completed a total of 12 research reports, published more than 30 papers (some of which were published in the highest national journals such as "Chinese Social Sciences" and "Economic Research"), and provided 3 "National Social Science Foundation Project Results Reports" to the Planning Office of the Social Science Foundation (all of which were adopted). The research content of this book starts from the transformation of economic development mode, and discusses the sustainability of economic growth and the requirements for monetary policy in the context of the overall trend of China's industrial economy and urbanization development in the coming period. Through the study of China's GDP structure and consumption structure since the mid-90s of the 20th century, the relationship between consumption and investment in the expansion of domestic demand is analyzed, which provides the basic macroeconomic background for the "study of money supply mechanism and future inflation risk". In addition, the trend of global inflation is discussed, and the trend of global inflation decline and the change of the Phillips curve are demonstrated. At the same time, the inflation trend of major developed countries and the historical experience of inflation control are analyzed, which provides the background of the international environment and the international experience for reference for discussing the future trend of inflation in China. On the basis of background analysis, this book starts from the basic theory, discusses and analyzes the basic relationship between money, finance and funds, studies the deficiencies in China's monetary statistics and monetary hierarchy and a series of theoretical and practical problems caused by these deficiencies, and compares the monetary statistics of major developed countries, and puts forward suggestions for revising China's monetary statistics and monetary hierarchy. At the same time, the sticky information theory developed in macroeconomics is introduced, and on the basis of this theoretical analysis, the philosophical issues of monetary policy in the sticky information economy are discussed. Following the theoretical analysis, this book begins with the analysis of China's practice, not only analyzing the internal mechanism of the realization of the ultimate and intermediate goals of China's monetary policy from 2001 to 2010, but also analyzing the internal mechanism of China's money supply mechanism and monetary policy transmission during this period. At the same time, the popular "currency over-issuance" theory in China is studied, and the effectiveness of the "money multiplier" that is still used by many people is discussed in more depth. In this process, this paper analyzes the price rise trend in the process of China's rapid economic growth since the 21st century, and believes that there was no inflation in China during this period, and the main cause of price rise was caused by the short supply of certain or several agricultural products. In the future, the rise in agricultural prices will also be the main cause of China's price increases, and it is likely to reappear every three years or so, and the main policy orientation to solve this problem is not to use monetary policy, but to use fiscal policy and administrative mechanisms. Bank credit is an important money supply mechanism. We analyze not only the impact of bank credit on the money supply, but also the influence of the shadow banking system in China's money supply, and the influence of bank credit and the shadow banking system on the effectiveness of monetary policy. On this basis, we discuss fiscal and tax policies to cope with rising prices, and analyze the relationship between monetary activity and inflation from a broader perspective. The impact of money supply on prices is not only manifested in commodity prices, but also in real estate prices, asset prices, etc., in view of this, after analyzing the relationship between money supply and price changes, we focus on exploring the relationship between money supply and real estate market prices and asset prices. At the same time, the influence of pensions, insurance funds, etc. on money supply and asset prices is analyzed, from which a series of useful conclusions are drawn. Finally, from the perspective of macroprudential supervision, how to improve the money supply mechanism to promote financial stability and price stability is analyzed. Based on in-depth discussion and analysis, we have gained new insights in 12 aspects: 1. Systematically analyzed the sustainability of China's economic growth in the next 10-20 years, and believed that China's economic growth will remain at a high level in the process of industrialization and urbanization. 2. It deeply discusses the relationship between urbanization and the transformation of economic development mode, and believes that as far as the whole country is concerned, the transformation of economic development mode refers to the transformation from industrial economy to urban economy. In this process, the upgrading of consumption structure from "eating, wearing, and using" to "living, traveling and learning" has changed to orientation, focusing on increasing consumption-oriented investment, and aiming at achieving comprehensive well-off and people's livelihood projects, and carrying out the transformation of economic development mode. 3. Since the 90s of the 20th century, affected by a series of factors such as productivity improvement brought by high technology, the improvement of monetary policy, the improvement of financial openness, the enhancement of trade integration and the strengthening of international competition, inflation in various countries and regions in the world has shown a downward trend, which has brought a rare opportunity period to China's economic development and also provided experience for China's economic development. 4. Clarify the logical relationship between money, finance and funds. Money is not any physical object, it is an economic function. This economic function is based on credit relations, effectively reflects the comparison relationship between various traded goods (including commodities, services, financial products and other goods entering the trading market) as the mechanism, and the basic function is to mediate, realize and promote transactions. In the modern economy, money is defined by institutional mechanisms, which itself has no value, no value scale and storage function. Finance, in essence, is the sum of the trading processes and these trading relationships based on the acquisition of future returns from these powers on the basis of equity in assets. Funds refer to financial assets with monetary functions. In real life, when people say "money", they usually mean "money". Starting from the relationship between money, finance and capital, monetary policy (and even money supply) and financial supervision should focus on the flow, flow and flow rate of "capital". 5. There are many shortcomings in the traditional standard for dividing the currency level, according to the development of China's economy and finance, the current division of the currency hierarchy should be revised, the specific assumption is: M0 = cash in circulation - RMB cash balance in cross-border circulation M1 = M0 + personal credit card revolving credit limit + banker's acceptance bill balance + demand savings deposit + enterprise can write check demand deposit M2 = M1 + institutional group deposit + rural deposit M3 = M2 + enterprise time deposit + resident RMB time savings deposit + Other deposits (trust deposits, entrusted deposits, margin deposits, extrabudgetary deposits) + foreign currency (RMB equivalent) deposits M4 = M3 + money market fund shares + repurchase agreements of non-bank financial institutions + short-term government bonds held by non-bank enterprises + housing provident fund deposits. 6. The degree to which monetary policy objectives are achieved reflects the relationship between the money supply and economic growth. In the 10 years from 2001 to 2010, in terms of the ultimate goal of monetary policy, economic growth was effectively promoted without inflation caused by excessive money supply. The increase in prices during this period was mainly caused by the temporary shortage of demand for one or more agricultural products. Given that China will be in a tight balance of agricultural products for a long time, temporary shortages of one or several agricultural products will occur, so it is likely that prices will rise every three years or so. From the perspective of the intermediate goal of monetary policy, the difference between the expected growth rate and the actual growth rate of the money supply represented by M2 is smaller than the expected increase and the actual increase of GDP growth rate, which indicates that the intermediate goal of monetary policy has been well achieved. 7. In terms of money supply mechanism, increasing the statutory reserve requirement ratio and issuing central bank bills have no effect of tightening the money supply; Raising the benchmark interest rate on deposits and loans not only has no tightening effect, but also has the effect of expanding loans. These are the main factors that lead to the need for administrative control over the number of new loans. Under China's current system, the use of administrative mechanisms to control new loans is also a major mechanism for regulating the money supply. 8. In China's practice, there is no "currency over-issuance" phenomenon, and the claim that the amount and growth rate of M2 exceed GDP is unscientific. In addition, continuing to use the currency multiplier to measure the amount of money in circulation and the amount of base currency is no longer in line with today's economic practice. In this regard, more detailed analysis is needed in accordance with specific conditions in order to draw conclusions that are consistent with practice. 9. In China, "shadow banking activities" mainly reflect the contradiction between the regulatory system and the development of the banking industry. The shadow banking system is not the main force driving up prices. 10. The impact of commodity price indices on China's price increases is relatively limited and less significant; However, the impact of asset price factors (house prices) on price increases cannot be ignored. 11. Money supply and credit policies have a relatively obvious impact on real estate price trends through the impact on developer behavior, land supply and housing purchase demand. At the same time, it also has a relatively obvious impact on stock market prices and trading volume. 12. Pensions and insurance funds have an important impact on the money supply and are also important factors affecting asset prices, so we should pay attention to the coordination of monetary policy and pension fund and insurance fund policies, strengthen the supervision of pension insurance and insurance funds, and promote the stability of financial asset prices. We have adopted the following three methods in our research: 1. The method of combining theoretical logic with practical logic (including historical logic). Confirm theoretical logic with practical logic, and reveal the internal mechanism of practical logic with theoretical logic. 2. A combination of normative analysis and empirical analysis. Take normative analysis as the orientation of empirical analysis, and empirical analysis as the confirmation of normative analysis. 3. Methods that combine qualitative analysis and quantitative analysis. Qualitative analysis is used to develop theoretical logic, quantitative analysis is used to develop practical logic, and at the same time, the organic combination of the two is realized. The significance of this research result is threefold: first, it systematically discusses and analyzes the main orientations and main contents of the transformation of China's economic development mode, proves that "housing, transportation and learning" are the focus of consumption structure upgrading, and puts forward that increasing consumption-oriented investment is the key to ensuring the comprehensiveness, coordination and sustainability of China's economic development. This is of positive significance to clarify the direction, intensity and goal of macroeconomic regulation and control. Second, the relationship between China's money supply mechanism and price rise is discussed and analyzed comprehensively and systematically, and the four types of money supply transmission mechanism and their status in China's practice are thoroughly studied, and the difference in interest rate transmission mechanism, the effectiveness of credit transmission mechanism and the importance of asset price transmission mechanism are demonstrated, which is of great significance for improving China's monetary policy and strengthening macro-prudential supervision. In addition, the relationship between China's money supply and price increases from 2001 to 2010 is demonstrated, and it is pointed out that three consecutive price increases are not inflation, and the measures to solve the problem should be based on fiscal policy, which is of great significance for improving the macro-policy control mechanism. Third, the relationship between money supply and asset prices is discussed and analyzed in depth, and it is pointed out that the quantitative changes of money supply directly affect asset prices such as real estate prices and stock market prices. Pensions and insurance funds are a non-negligible part of these money supply, so in the regulation of money supply, it is necessary to pay attention to the changes in asset prices and the impact of pension and insurance fund operations on the money supply. Due to the immaturity of various objective conditions and the limitation of the scope of this topic, we have not been able to explore three issues in depth: First, we have not been able to deeply explore and analyze the relationship between money supply and price increases in the context of the marketization of RMB deposit and loan interest rates. Second, the relationship between money supply and price increases under the conditions of capital account opening has not been explored and analyzed in depth, so the exchange rate channels of money supply have not been studied. Third, since the orientation, content, mechanism and policy tools of macroprudential regulation are still an issue that needs to be further explored, this result fails to deeply analyze the relationship between macroprudential regulation and money supply (and thus price increases). These issues need to be deepened and improved in future research. It is worth mentioning that this book was completed at the end of 2011, and the data of the article is roughly as of 2010. However, since it does not prevent the conclusion of this book, we have not made new additions to the data in this book. The chapters are written by He Haifeng (Chapter 1), Wang Guogang (Chapters 2, 7, 10, 11 and 12), Yu Weibin (Chapter 3), Yan Xiaona (Chapter 4), Xuan Xiaoying (Chapter 5), Peng Xingyun (Chapters 6, 8 and 9), Zhou Liping (Chapter 13), Zeng Gang (Chapter 14), Yuan Zengting (Chapter 15), Yang Tao (Chapter 16), Liu Yuhui (Chapter 17), Yin Zhongzhong(Chapter 18), Cao Honghui (Chapter 19), Guo Jinlong (Chapter 20), All-first silver (chapter XXI). Participants in the discussion of the research results of this book (except the authors) include: Yin Jianfeng, Dong Yuping, Cheng Lian, Zhang Yuewen, Hu Zhihao, Xu Yiguo, Huang Guoping, Cai Zhen, and Fei Zhaoqi. Those who contributed materials and assistance to the writing of this book include: Zhao Peide, Liu Geping, Shi Jinping, Luo Ying, Xue Bo, Xie Fang, Zhang Wei, Liu Jianjian, Zhao Juan, and Wang Shuang. The publication of this book has been funded by the "Publishing Fund" of the Innovation Project of the Chinese Academy of Social Sciences and the strong support of the China Social Sciences Press.