Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/128517 
Year of Publication: 
2013
Series/Report no.: 
ADB Economics Working Paper Series No. 380
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
This paper examines the fiscal and monetary policy options available to the People's Republic of China (PRC) as a sovereign currency-issuing nation operating in a dollar standard world. The paper first summarizes a number of issues facing the PRC, including the possibility of slower growth and a number of domestic imbalances. Then, it analyzes current monetary and fiscal policy formation and examines some policy recommendations that have been advanced to deal with current areas of concern. The paper outlines the sovereign currency approach and uses it to analyze those concerns. Against this background, it is recommended that the central government's fiscal stance should be gradually relaxed so that local government and corporate budgets can be tightened. By loosening the central government's budget but tightening local government and corporate budgets at a measured pace, the PRC can avoid depressing growth or sparking excessive inflation.
Subjects: 
fiscal and monetary policy options
sectoral balances approach
sovereign currency approach
middle-income trap
modern money theory
JEL: 
E60
E61
E62
O23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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