Controlling money during socialist economic reform: the Chinese experience

Contrary to the easy job that some conservative economists imagine, the task faced by the socialist monetary authority in controlling the money supply during economic reform is a daunting one, as recent experience in China indicates. It is difficult to estimate the demand for money in the mixed system that has emerged from the reform process, with all its structural disequilibria. Given prevailing economic and political interferences, keeping the money supply within targets is also beset with problems. Monetary issues have not received much attention in the conventional discourse about socialist economics, before or during reform. Hence the Chinese central bank often has to take uninformed action on events that it cannot effectively control. The results could be very serious, even tragic. In any case, it seems that the bank should not shoulder the main blame.