ABSTRACT
In 1998, in order to complement the government’s macroeconomic policy to expand domestic demand, the People’s Bank of China carried out a rather active monetary policy. China lacks the market conditions for a monetary policy to be able to indirectly adjust the market. In order to ensure the realization of the ultimate goal of the monetary policy, the People’s Bank of China has set some interim targets, including the money supply target, balance of international payments target, and exchange rate target. In 1998, the external target of monetary policy was a balanced international payment and a stable exchange rate. The monetary policy, as a key component of the macroeconomic policy, should also be centered on expanding domestic demand. The evaluation of the macroeconomic situation and the target of the macroeconomic program are the basis for establishing intermediate targets for monetary policy.
