There are several reasons for this: levels of excess capacity in factor and product markets remain high in many economies; wage outcomes have been subdued, even in countries with low unemployment; surveys show that inflation expectations have declined; commodity prices have fallen substantially over the past 18 months; and the internet and other technologies may be changing the tradables content of traditional non-tradable goods and services.
The two monetary systems are of equal importance to China in its reform and liberalisation. One does not precede or be subsidiary to the other. They will operate in a mutually independent manner. The second principle relates to the relationship between the two monetary authorities.