By expanding the domestic money supply, foreign inflows can fuel inflation.

ECONOMIST: Exchange rates

On the other hand, the PBOC is conducting aggressive open market purchases of dollars to hold down their yuan, which is naturally increasing their domestic money supply and offsetting their tightening measures.

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Mr Walker estimates domestic saving from money-supply and capital-account data (which, again, should be more reliable than national-account numbers).

ECONOMIST: China's economy

"Velocity" is defined, roughly, as gross domestic product divided by the money supply.

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Another chart shows that whenever money-supply growth has exceeded gross domestic product growth, small-caps tend to rise.

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