Monetary Policy in China

Masters
Essay
Politics
Pages 7 (1757 words)
Download 0
In September 2008, the Politburo, China's highest-ranking decision-making body announces a change in the monetary policy in the economy. As the country for the long time employs a tightening policy in order to combat inflation, the country takes on a reverse direction through a loosening monetary policy…

Introduction

The China's central bank, People's Bank of China reflects the decision-making body's concern and aim for the change in policy.
The article's primary economic element is the lowering of the interest rate in the economy. This lowering of the benchmark interest rate has an effect on the country's monetary policy and money supply. According to Bradsher in the article, "effective Tuesday, the People's Bank of China lowered by 0.27 percent, to 7.2 percent, the regulated benchmark rate that commercial banks may charge for one-year loans to business borrowers with strong credit histories. Rates for shorter-term loans will be generally cut even more while rates for longer-term loans will be subject to smaller adjustments, the central bank said, without providing details (September 2008)." By lowering the interest rate, the central bank aims to signal to commercial banks to lower the lending rate. By lowering the lending rate, the country aims to make funds more accessible to business borrowers.
In figure 1.1, China's benchmark rate is lowered. The interest rate aims to lower the money supply in the country. By lowering the money supply coupled with less stringent limits on lending, China's Politburo aims to "protect the country from the global economic downturn."
By loweri ...
Download paper
Not exactly what you need?

Related papers

Monetary System
In. order to compensate with the needs, they have to buy currencies which are more recognized in the world and with this, they need a larger volume of their monetary resources in which they will have to spend tremendous amount just to meet or purchase a certain currency. By doing so, the value of their currency will be more likely affected and it may cause sudden change of the prices of basic…
China and Foreign Direct Investment
The greater part of FDI in China has originated from other areas of Asia excluding Japan, Hong Kong which is a self governing region of china has the largest record, however the dominance of Hong Kong is illusory in that much of the FDI is from elsewhere, in fact the stock listed as Hong Kong source FDI in China is just Chinese domestic investment round tripped through Hong Kong. Additional FDI in…
Foreign Policy of China
In investigating this problem the method adopted is qualitative analysis of both historical and current data to lay bare the relation between the country's economic growth and its foreign policy, particularly the economic component of that policy.…
Monetary Policy in China
The China's central bank, People's Bank of China reflects the decision-making body's concern and aim for the change in policy.…
Fiscal and Monetary Policy
This paper is aimed at investigating and defining the best way through which Britain should tackle the present financial crisis. To achieve this objective, the IS/LM model will be employed to see how various policy measures affect the interest rate, national income and inflation rates.…
Yuan Revaluation: It’s Impact on the Economy of China and U.S.
It is more important to recognize that the Chinese government should avoid repeating the mistakes brought about by the appreciation of the Yen. …
Monetary Policy of UK
This involves manipulating the supply of money, the level and structure of interest rates and other conditions affecting the availability of credit. However, in the context of developing economies monetary policy acquires a wider role and it has to be designed to meet the particular requirements of the economy. This involves not merely the restriction of credit expansion to curb inflation, but…