Macroeconomic management of the Chinese economy since the 1990s

China has achieved remarkable growth and development in the past two decades. This paper explores how Chinas macroeconomic policies were managed during the 1990s to achieve such high levels of growth.

The paper finds:

• Despite steady progress, a major challenge will be to maintain growth without the heavy involvement of the government.
• The government used a macroeconomic policy mix of monetary and fiscal policy to achieve non-inflationary growth.
• Exchange rate policy, capital controls and sterilization policy were used to maintain external and internal balance, and manage the Chinese economy as an open economy.
• The use of stabilization policies by the government was quite successful.

In conclusion the paper notes:

• The Chinese government has been successful in the macroeconomic management of an open economy and that such high growth rates could continue in the future but China needs to maintain social stability by establishing social safety nets.
• In order to maintain its high growth success, the further widening of inequality needs to be prevented.
• There are some universal implications since Chinas experience certainly enriches the understanding of macroeconomics and especially the design of stabilization policy.