China had a command economy with no real monetary policy for the first decade, then moved to a two-tier banking system and began to operate direct and later indirect monetary instruments; by the mid-1990s it was using a range of instruments in a partly liberalised financial system, but the key decisions required to formalise a modern monetary policy framework were never quite taken.

Years Targets and attainment Classification
1974-83 financial system still geared to providing finance for investment decisions in national state plans; foreign exchange transactions handled within planning process multiple direct controls MDC
1984-93 two-tier banking system, in which bank lending is main source of finance but not mechanism of physical plan; monetary instruments include credit ceilings, redeposit requirements, central bank refinancing and some use of officially set interest rates; bonds issued since 1981 and bought partly by individuals; currency managed (fixed) with respect to undisclosed basket, dual exchange rates unstructured discretion UD
1994-2017 exchange rates now unified and heavily managed, mid-2000s forex market liberalised and exchange rate more flexible (except 2008-10); more (but still partial) use of indirect instruments including interest rates instead of direct lending controls; some use of monetary targets; central bank gets some autonomy, direct fiscal dominance largely controlled (but reappears in indirect form of uncontrolled bank lending to state-owned enterprises); 2015-16 exchange rate intervention reduced, bank interest rates fully liberalised, policy rate corridor introduced, policy rates become main instrument; but crucial steps to formalise monetary policy framework with clear nominal anchor still not taken loosely structured discretion LSD

Selected IMF references: RED 1981 section III.5, p80; RED 1985 pp52-5, 80-1; Economic Reform in China since 1978 (1989), pp24-6, chX; RED 1989 pp31, 33, 53-7; BP 1991 pp16-17; BP 1994 pp5-8, 22-31; BP 1995 chV; RED 1996 pp21-3, 50; RED 1997 pp19-23; RED 1998 pp12-15, 19-20; SR 2006 pp14-16; SR 2009 pp17-20; SR 2012 pp16-17; SR 2013 pp23-5, 27, 31, 33-4; SR 2014 pp12-13; SR 2015 p15-16; SI 2016 pp12-15; SR 2016 pp5, 7; SI 2017 pp34-40; SR 2017 pp8, 24-5, 28-9; SR 2018 pp26-8.

Additional sources: Xiong (2012); McMahon et al. (2018).

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