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The People's Bank of China (PBC) has made great strides in modernizing its monetary policy frameworks but their effectiveness will diminish as the sophistication of the economy increases. Empirical evidence supports maintaining a reference to money in China's monetary strategy and enhancing the role of interest rates in its conduct. We advocate adoption of an eclectic strategy involving the monitoring of several indicators, and of a short-term interest rate as the operational target. The PBC should be granted discretion to change its policy rate, and there are no technical obstacles for such a move to occur in the near future.

Demand for money -- China. --- Finance -- China. --- Monetary policy -- China -- Econometric models. --- Monetary policy -- China. --- Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: General (includes Measurement and Data) --- Price Level --- Deflation --- Banking --- Monetary economics --- Finance --- Macroeconomics --- Money markets --- Monetary base --- Bank credit --- Banks and banking --- Money market --- Money supply --- Prices --- Credit --- China, People's Republic of --- Monetary policy. --- Money. --- Multiplier (Economics) --- Zhongguo ren min yin hang.