China's Fiscal and Monetary Policy

According to an article released by Business Times on January 11, 2010, the government ordered banks to implement loan management and monetary policy to prevent overinvestment, but the Chinese government will continue to make full-scale I will take stimulus measures.

Since the collapse of the financial tsunami and Lehman Brothers in September 2008, the world economy has fallen sharply and the Chinese economy is no exception. After the global financial crisis, Economist (2008) reported that the real GDP growth rate in China slowed to 9% in the third quarter of 2008 and the export growth rate decelerated to 21.1%. In fact, it is far below analysts' expectations. Recently ... More

As reported in the Business Times (2010), in early January 2010, the Chinese government stimulated the surge in economic credit in the middle of 2009, ordered banks to manage their loans and invested excessively in the economy I tried to prevent it.

As Bloomberg (2010) reported, the People's Bank sold a three-month bill for the first time in 19 weeks at a higher interest rate and the People's Bank began to introduce monetary policy. The central bank maintains the benchmark one year loan interest rate at 31% of the lowest point of 31% in five years, five times in the last 4 months of 2008, and in the first eleven months of 2009 Since it reached 210,000, we have eased monetary policy so far. Record new billion loan

The People 's Bank of China provided 3 - month bonds of 60 billion yuan with a yield of 3684%, which is 4 basis points higher than the previous month. According to the data summarized by Bloomberg News, the central bank also lowered 137 billion yuan from financial markets since 23rd October 2009.

Monetary tightening measures adopted by the Chinese government can be regarded as adjustment of the discount rate. The discount rate is the interest rate borrowed from the central bank by the bank. The bank borrowed from the central bank leads to an increase in the money supply in the economy

Following the economic downturn, the Chinese government developed expanding fiscal and monetary policy. We have set up a fiscal stimulus package of $ 588.8 billion (15% of China's gross domestic product) to increase export tax rebate of infrastructure as described in Appendix 4 and to temporarily cancel export tax. The industry provides temporary financial support to reduce property taxes and simplify housing certification of new homeowners. Furthermore, in September 2008, China announced an increasing monetary policy to lower interest rates from 218 basis points in November to 100, moving the LM curve to the right, stimulating aggregate demand. However, as monetary policy remains increasingly stringent, these interests primarily benefit state enterprises from smart loans, as China is raising the reserve ratio to avoid rising inflation expectations .

Fiscal policy and monetary policy are important for economic growth and national development. However, fiscal policy and monetary policy have different uses, advantages and disadvantages. Fiscal policy is useful to the country by collecting funds and rights. If fiscal policy fails, it also affects the company's monetary policy. On the other hand, monetary policy does not talk about growth and development, its main purpose is to ensure adequate liquidity, then suppress inflation and reduce unemployment. Fiscal policy and monetary policy have their own goals, and as the economy grows, both fiscal policy and monetary policy should be formed properly.

Fiscal policy, including taxation and government expenditure, usually complies with Congressional law, so fiscal policy can be distinguished from monetary policy. Meanwhile, monetary policy, including money supply and interest rates, is usually centrally managed. Bank neutral fiscal policy is usually done when the economy is not going backwards or prosperity. There is no change that affects the level of economic activity because the government's deficit expenditure (not excess taxation by taxation) is roughly the same as the average.