Advertisement

Monetary tools needed

Reading Time:2 minutes
Why you can trust SCMP
0

THE ability of the People's Bank of China (PBOC) - China's central bank - to develop a proper set of monetary tools to influence the economy must be one of its more pressing tasks.

For a bank used to resorting to administrative orders and credit quotas to influence money supply, this is no mean task.

How well it sets up these tools - together with the success of the state enterprise and banking reforms - will be a crucial measure of China's dexterity in steering the planned economy towards a market-oriented one.

Administrative orders and credit quotas are heavy-handed, easy to implement, but highly inefficient.

State banks tend to implement orders and quotas across-the-board, with little regard to borrowers' ability to pay.

Any credit squeeze tends to translate into rigid control over wage bills and operational expenses.

To a great degree, a similar impact could be attained - but more efficiently - by monetary tools.

Advertisement
Select Voice
Choose your listening speed
Get through articles 2-3x faster
1.1x
220 WPM
Slow
Normal
Fast
1.1x