One corollary of this is that even “moderate” growth in China is quantitatively significant. If China grew by, say, “only” 7 per cent in 2013, that would add more to global GDP than the 10 per cent growth recorded in 2003.3 The second proposition was that China, like all economies, has a business cycle.
So, if bank A creates money by extending a loan to a household, and that household then buys something from someone who banks with Bank B, Bank A will have to transfer bank reserves to Bank B. If they don’t have the bank reserves to settle, this bank will be in great trouble.