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Does Chinese New Year impact the Chinese money supply (M0)?

Speculation ahead: I do not have any background in economics.

In China every year, the supply of cash in circulation (M0) shoots up by ~10% for one month, then drops back down. This seems to be because of Chinese New Year:

A graph showing the Chinese M0 money supply, with periodic annual spikes up and back down

Traditionally, "red envelope" cash gifts are given to children during Chinese New Year, which would require withdrawing cash. If you look at the interactive version of this graph from Trading Economics, you'll see that there is a spike of ¥1 trillion or more, near the start of each calendar year.

Why does the month change - sometimes January, sometimes February, or split between the two? It matches the date of Chinese New Year that year, which depends on the lunar calendar. After the holiday, the money is spent and deposited, causing the M0 supply to decrease.

If this is true, you would expect to see similar patterns in other countries that celebrate annual holidays with a tradition of cash gifts. You can see similar, smaller blips in the M0 graphs of countries like Singapore (which has a large ethnic Chinese population), and South Korea (with two blips per year: Seollal in the beginning of year and Chuseok in the fall). But no such annual pattern is visible in the M0 graphs of areas like the United States, the Eurozone, Brazil, or Saudi Arabia.


This post originates from a Hacker News comment section where user queuebert asked about the pattern in spikes. As I mentioned at the top, I have no background in economics and I could be misinterpreting these numbers; I couldn't find any (English-language) sources confirming or denying this Chinese New Year idea, which is why I wrote this. Any ideas?

One more thing to think about: in recent years it seems the M0 cash spike has been shrinking. This could be related to an increase in digital red envelopes from apps like WeChat and AliPay, and banking services. Digital (and mobile) payments seem to be the norm in China these days; when I visited last year, I bought a snack and paid with bills. The store employee remarked, "Wow, it's rare for anyone to pay with cash these days."

randomBobbie Chen