Macroeconomic Management of the Chinese Economy Since the 1990s

This chapter aims to identify the pattern of China’s macroeconomic management and explain how macroeconomic policy has been implemented for achieving non-inflationary growth in China.The Chinese economy’s performance has maintained a cyclical pattern: rapid investment growth, supported by expansionary policy, drives up the economic-growth rate. Inflation follows, so policy is tightened and growth slows. But inflation remains high or rising, so more tightening is imposed. Inflation falls at last, but growth slows more than desired, owing to the overcapacity that resulted from excessive investment in the earlier phase of the cycle. In response, policy becomes expansionary again, and the cycle begins anew: led by investment growth, the economy rebounds.