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China's Monetary Policy Framework in the Past 70 Years: 1949—2019

【Authors】
HE Dexu, FENG Ming
【WorkUnit】
National Academy of Economic Stratcgy, Cass, 100028.
【Abstract】

In this paper, we review the historical transformation of China's monetary policy framework in a systematical way in the last 70 years since the founding of the People's Republic of China, from the five dimensions of money creation mechanism, monetary policy objective, monetary policy instrument, monetary policy rule and monetary policy transmission channel. We then focus on the current policy framework and propose its major characteristics: the base money creation mechanism is undergoing fundamental structural changes and the credit system is becoming more and more complex; the multiple objectives of the monetary policy are prone to conflicting with each other; quantitative tools and price-based tools coexist, while the validity of various new structural tools still needs to be tested; the monetary policy decisions are mainly discretionary and clear quantitative rules have not been formed; the monetary policy transmission is still dominated by bank credit channels, and the transmission to real economy is partially blocked. In the end, we outline the four major challenges facing China's existing monetary policy framework and put forward policy recommendations for its further transformation in the future.


JEL:E52, E58

【KeyWords】
China‘s Monetary Policy Framework, Money Creation Mechanism, Monetary Policy Objective, Monetary Policy Instrument, Monetary Policy Rule