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Essay On China Monetary Policy

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1 MONETARY POLICY OF CHINA

INTRODUCTION
Monetary policy of a country is a process by which the Federal bank of the country controls the money supply in the country. It does so to bring stability in the economy. All the policies which the federal bank of the country make, are to ensure that the country grows at a constant level and the value of money increases with period of time. Also the responsibility of federal banks is to keep inflation rate in check which directly affects the unemployment of the country.

China is one of the biggest economies of the world and has a direct influence on all the economies in the world. China’s monetary policies are made by its federal bank, i.e. People Bank of China. It regulates all the policies related to money flow within the country.

Analysis:
People bank of China played a major role in the GDP growth rate of china. It is because of the policies of Federal bank of china that china was regarded as the dragon economy of the world which was witnessing the growth rate in double digits for a whole decade. There is a lot of controversy over these monetary policies. People bank of china tried to intervene and limited the appreciation of its currency, i.e. Renminbi (RMB) against the dollar and other currencies. Some analysts argue that China …show more content…

Due to this pressure, finally People bank of China changed its monetary policy in 8 years when they announced that RMB’s exchange rate would now become “flexible”, based upon the market trend with respect to exchange rate movement of currencies in a basket. This new policy was evident as the RMB’s value as compared to Dollar can be seen to have risen from 8.11 Yuan to a dollar in july 2005 to 6.83 yuan in 2008, an increase of about 18.7% in 3 years

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