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Economic Research

In China, Politics Trump Monetary Policy

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12:51:00 PM | Last Updated

EXECUTIVE SUMMARY

The intersection of two political cycles is a key factor behind China’s delay in implementing the tighter monetary policies its overheating economy needs. In accordance with a short-term cycle, central government officials are moving to consolidate control over monetary policy. Meanwhile, a longer-term cycle oriented toward securing factional dominance within the Chinese Communist Party (CCP) in 2012 is motivating Party leaders to direct funds to local-level cadres through the state-owned banks, potentially exacerbating inflation. These conflicting pursuits may[...]

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