What monetary policy does China need'.

(From The Nation (Thailand))

Byline: The Nation.

China's remarkable growth has been financed recently by a rapid expansion of money and bank credit that is producing an unsustainable investment boom.

This renews concerns the country may not be able to avert a replay of the painful boom-and-bust cycle such as the one it endured in the mid-1990s. Monetary policy is usually the first line of defence in such situations. But China's policy has been hamstrung by the tightly managed exchange-rate regime. This regime prevents the central bank - the People's Bank of China (PBC) - from taking appropriate policy decisions to manage domestic demand, because …