Choice of the Path of Fiscal and Monetary Policy Coordination in China

The role of monetary policies regulating social the aggregate demand is highlighted, while the role in restructuring the supply and demand are greater limitations. The Central Bank indirectly affects the currency in circulation and the total size of credit by adjusting the statutory deposit reserve rate, the rediscount rate, open market operations; The Central Bank increases or decreases in money supply by limiting the loan quota and the currency issuance. Thus the role of the monetary policies in alleviating serious problems in the field of circulation area is more rapid, clear and effective. However, the central bank can not loan directly to a large number of economic development in lagging industries especially public goods industries as a result of the restrict of the credit funds movement, and therefore the role of monetary policies in improving the social structure and the rate relationship of national economy is relatively limited. The structural imbalance between domestic demand and external demand makes the Chinese economy affected seriously in the circumstances of the U.S. financial crisis and a sudden decline in global demand.