This　paper　examines　the　existence　and　mechanism　of　China＇s　liquidity　trap.　First,　a　broad　money　supply　model　is　reconstructed　to　evaluate　the　effectiveness　of　monetary　policy.　Based　on　the　observed　data　from　1997　to　2022　and　first-order　difference　regression　results,　we　find　that:　The　relationship　between　the　monetary　base　and　broad　money　exhibits　two　distinct　stages,　with　2008　as　a　delineating　point.　Pre-2008,　the　money　creation　multiplier　is　significant;　post-2008,　it　becomes　insignificant.　Second,　by　examining　the　asset-side　and　liability-side　gaps　of　the　financial　system,　we　have　identified　two　liquidity　traps.　The　first　occurs　between　2015　and　2019,　caused　by　funds　idling　within　the　financial　system.　The　second　occurs　in　2020-　and　is　caused　by　recessionary　expectations.　Monetary　policy　flexibility　is　waning,　compelling　strategic　decisions　for　Chinese　government　and　central　bank.