China's persistent current account surplus has accumulated a huge foreign reserve. 

Together with a relatively not so flexible exchange rate regime, this generates excess liquidity in China. 

Many commentators argue that this excess liquidity has contributed a lot to China's inflation. 

I show in this paper that some popular measures of excess liquidity were not significantly correlated to inflation in China.

But those measures were significantly related to real estate investment, which implies that excess liquidity might have nurtured an unsustainable growth of China's real estate sector.