* Since March 2009, BOE has suspended the reserve averaging regime and short-term open market operations on account of its asset purchases through creation of central bank reserves (known as quantitative easing). Source: Adapted for advanced countries from Friedman B.M. and Kenneth N. Kuttner, Handbook of Monetary Economics, Vol.3B, North Holland, 2011.
Economic measures such as tightening financial conditions may facilitate the adjustment. Furthermore, non-traditional finance could pose a systemic threat to financial stability in part because banks remain closely linked to the shadow-banking sector. Prudential policies may be called for. China’s authorities are conscious of these and other short- and long-term financial challenges, as shown by efforts to adjust to recent economic developments.