With the increase of voltage level requirements for reactive power compensator, modular multi-level converter (MMC) based static compensator (STATCOM) has gradually become a hot topic. However, there is a serious current circulation problem in the operation process of MMC because of its mechanism and the imbalance of the power grid. In this paper, the mathematical model of MMC converter is established by using the switch equivalent model, and the mechanism and influence of circulating current are analyzed. To solve this problem, a circulation suppression method based on the combination of repetitive control and proportional- integral control is proposed. And the stability of proposed strategy is analyzed using small-gain principle based on MMC model, meantime, the parameter design methods of decay function and lead-compensation term are given. Finally, the feasibility and validity of the proposed circulation suppression strategy and stability analysis are verified by simulation model.