Economic Fluctuations and Macroeconomic Policies

Wu Jinglian, Ma Guochuan, Xiaofeng Hua and Nancy Hearst

in Whither China?

Published in print May 2016 | ISBN: 9780190223151
Published online May 2016 | e-ISBN: 9780190223182 | DOI:
Economic Fluctuations and Macroeconomic Policies

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Several rounds of economic overheating and inflation during the reform and opening period have posed major economic challenges for China. The government adopted expansionary fiscal and monetary policies to achieve short-term economic growth. Yet to create a favorable environment for reform, the economic growth rate must be set at a reasonable level; the pursuit of higher rates of production and increases in the amount output should be prevented; and economic overstretching and chaos must be avoided. China’s economic problems are symptoms of an internal imbalance between investment and consumption, and an external imbalance caused by large surpluses in trade and the balance of payments, leading to a monetary oversupply and higher inflationary pressures. These imbalances are related to shortcomings in China’s economic growth model. The key to addressing them is to improve economic efficiency by advancing reform and allowing the market to play a more important role in resource allocations.

Keywords: Chapter macroeconomic policy; overheating; economic fluctuations; inflation; economic imbalances

Chapter.  6332 words. 

Subjects: Economic Development and Growth ; International Economics

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