Navigating Monetary Policy.docVIP

Navigating Monetary Policy 　　The Central Economic Work Conference Sets the Tone for 2010 　　WITH the accomplishment of last year’s eight-percent economic growth under its belt, the Chinese government proceeded to set the tone for China’s economy in 2010. The Central Economic Work Conference held on December 5-7, 2009 saw some minor policy changes but much justification for staying the course on major monetary decisions. 　　 　　Staying the Course, Trimming the Sails 　　 　　Trends in China’s financial and monetary policies have been of great concern to insiders in every industrial sector long before this conference opened its doors. It has been predicted that sooner or later China would discontinue its loose money policy under increasing criticism of asset price bubbles, fear of which is felt by economic policy wonks and the general public alike. China’s macro-economic policies have long been entangled in the following dilemma: a decoupled currency lets a society work with its own momentum but generates bubbles; a tight one balances growth but tends to strangle it as well. So what is at issue is when and how the central government should exercise the exit strategy they are under pressure to announce. 　　The right timing won’t be coming around in 2010, the Central Economic Work Conference has decided. Its final prescription is to maintain the continuity and stability of the current macro-economic policy, including a proactive financial policy and an appropriately loose monetary policy. 　　The policy continuation decision is based on assessment and analysis of the global and domestic economic situations, noting that the latter’s own “recovery lacks a solid foundation.” Domestically, it is getting increasingly difficult to keep up stable and fast growth while making necessary adjustments to the mode of economic development. The internal driving forces for economic recovery are still shaky: the country’s problematic economic structure, a weak agricultural foundation,