China will issue 1.5 million yuan notes to cover the shortage of cash as it struggles to cope with a surge in demand for foreign exchange in a country that relies on the yuan for almost all its imports.
China has been struggling to deal with a huge currency shortage, as its central bank has imposed a series of tough controls, including limiting the number of banks that can open accounts.
China’s central bank said on Friday that the government would issue 1 million yuan banknotes in the first week of January.
It would then issue the next five million yuan and then 10 million yuan, the ministry said.
The currency issue was part of the government’s strategy to stimulate the economy and avoid a deflationary spiral, said Wang Zhenqiang, an economist at Caixin.
“There are a lot of people in the country who want to invest, but can’t do so as they cannot get a loan,” Wang said.
“Inflation is increasing, but they cannot afford to spend.”
The government said on Monday that it would issue 3.4 billion yuan ($48.8 billion) in the next three weeks.
That would be enough to cover nearly one-third of the country’s basic needs for the rest of the year, according to the People’s Bank of China.
But it would only be enough for a third of the population, a third who has to live with poverty and a third with high living costs.
China is still experiencing its own currency shortage.
The central bank issued 10 billion yuan in new currency on Friday to pay for the import of goods and services in the run-up to the Lunar New Year holiday.
But the new currency, which had not been circulating since early March, has yet to circulate in stores.
The government will also issue another 10 billion to 15 billion yuan worth of new currency to pay the government for its imports from China’s overseas trading partners, the Central Bank said.
In a speech on Monday, Prime Minister Li Keqiang said the government was working to help China’s economy, which has been beset by a weak currency, recover from the currency crisis.
He said the Chinese government had been working on the issue for a while and had reached a solution.
But economists say the problem has been exacerbated by the recent currency devaluation.
“The yuan is now at a record low, and it’s very difficult for the government to control the currency,” said Xiao Fengmin, head of the Center for International Economic Research at Peking University.
“The central bank is really struggling to keep the yuan low.”