Timeline of China’s Fiscal and Monetary Policy Since 1995

Here are some facts about China’s fiscal and monetary policies from the present back to 1995.

– Tight monetary policy (current)

Earlier this year, facing pressure from surging inflation, a resurgence in fixed-asset investment and excessive lending and liquidity, China decided to shift its monetary policy from “prudent” to “tight”.

Tight policy has included raising commercial banks’ reserve-requirement ratios, allowing the currency — renminbi (also called the yuan) — to appreciate and controlling bank lending.

The latest move was in June, when the central bank — People’s Bank of China (PBOC) — raised the reserve ratio by 1 percentage point in all: 0.5 point effective June 15 and another 0.5 point effective June 25. The rise on June 25 was the sixth this year and brought the ratio to a record 17.5 percent.

The tight policy appears to have had an impact. The consumer price index eased to 6.3 percent in July from a near 12-year high of 8.7 percent in February.

Economic growth slowed to 10.4 percent in the first half of 2008 from 11.9 percent for all of 2007.

– “Prudent” fiscal and monetary policies (2005-2007)

China switched to a “prudent” policy at the beginning of 2005. During 2005, the country reduced issues of long-term National Construction Bonds to 80 billion yuan (11.7 billion U.S. dollars) from 110 billion yuan the previous year and cut the fiscal deficitby 19.8 billion yuan to 300 billion yuan.

In 2007, the PBOC raised the reserve ratio 10 times, from 9 percent in January to 14.5 percent as of December. The central bank had raised the ratio only five times over six years since 2000.

– “Proactive” fiscal policy and “prudent” monetary policy (1998-2004)

The proactive fiscal policy and prudent monetary policy were adopted in 1998 to counteract the negative impact of the 1997 Asian financial crisis.

China issued 910 billion yuan worth of national bonds over these years and invested the proceeds in infrastructure. The move boosted domestic demand, which had been weakened by the financial crisis, and contributed 1.5 to 2 percentage points of national output growth each year.

– “Appropriately tight” fiscal and monetary policies (1995-1997)

To rein in high inflation that started in 1993, China imposed appropriately tight fiscal and monetary policies. There was a surge in fixed-asset investment in the latter half of 1992, which was followed by major food price rises in 1993.

After the new policies were launched, the PBOC stepped up efforts to control money supply and finally reduced the consumer price index from 21.2 percent in January to 12.3 percent in August in 1995. The annual price increase was kept under 15 percent and gradually leveled out in the following years.

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Green Careers Hold the Key to American Economic Growth

careers are going to play a pivotal role in the recovery of the U.S. Going green will help revive the economy towards creating job growth and counter the effects of net job loss. Three areas aiding the recovery will be: the broad definition of green, economic growth and foreign policy. Regardless of your political persuasion, going green is a plus.

There is a lot of potential in the green market. The concept of green is still in its infancy and the technological advances that have yet to be made are enormous. I would venture that it holds more potential for real economic growth than any other industry. The solar panel and wind turbine industry alone are experiencing enormous economic growth. The American Wind Energy Association (AWEA) is seeing huge growth in wind farms. To really grasp how the solar industry is growing, you must realize the extreme growth of these programs that are being started in community colleges across the United States. The AWEA.org is reporting double digit growth in wind farm installation. Billionaires have been a big proponent of wind power for the past few years, and will continue to gain interest. According to coolerplanet.com, the solar energy industry will see tremendous growth in the coming years. The bottom line is that green careers in just these two sectors alone will be a boost to the economy.

Green jobs are going to be vital because of the truly broad definition of green collar jobs. While some might say that the broadness of the definition may negatively impact the view of the concept, I say the opposite. Because there is not a clear definition, the broadness helps people from all economic and political backgrounds find a niche. There have been many green industries that have already been formed in the early stages of a green economy. The broad definition also helps shape huge political support on both sides of the political isle. No politician wants to be seen as anti the new big thing, therefore they end up egging the industry on.

The final reason for the really positive economic growth of the green industry is foreign policy. As T. Boone Pickens and many other politicians have pointed out, creating our own energy is important. Clean energy is a concept that falls into a national security zone, which helps political viability. Clean energy goes way beyond what most people think; sustainable energy also covers the Smart Grid. Creation of the smart grid has extreme nation importance. One key note on clean energy is that the raw materials must be created and manufactured in the U.S. to truly spur real economic growth. While foreign trade is very good, switching Middle East Oil, for Chinese Wind turbines is not such a good switch. By creating the center of green manufacturing in the U.S., it will help alleviate major foreign policy issues.

Green careers can play a role in nearly every aspect of the American recovery. By discovering and working toward a real green industry now, the U.S. can be in the driver’s seat of an economic phase that should encompass the next twenty years of world economic growth.

Reference:

1. http://hotjobs.yahoo.com/career-articles-newest_professions_growing_salaries-992 2. http://www.usatoday.com/news/education/2009-08-02-sustainability-degrees_N.htm