The first part is an introduction to China’s monetary policy framework, the second part clarifies how monetary policy supports the real economy, the third part is about how to prevent and resolve financial risks, and the last part focuses on how to strike a balance between internal and external equilibrium.
Low inflation appears even more of a puzzle when considering the composition effect, which should cause inflation to rise over time, all else being equal. Of course, a number of factors may currently be at play, many of which we do not yet understand properly, such as firms’ state-contingent pricing decisions. 26 Structural transformation is also still ongoing. Consider Spain.