China’s Future Monetary Policy

Abstract

This final chapter will focus on examining China’s monetary policy evolution and exploring the alternatives for its future policy framework as it moves towards the Impossible Trinity eventuality. China’s economy may be many years away from full operation in the new paradigm, where capital account convertibility will force Beijing to choose between controlling the exchange rate and the interest rate. However, the process of moving towards it has begun slowly. As discussed in the previous chapters, during this transitional stage, China will be facing daunting challenges on making the necessary monetary policy and economic structural adjustments to tackle the inevitable policy choice between monetary autonomy and exchange-rate control when its capital account is fully opened.