Describe and evaluate the main macroeconomic policies used by the Essay - 4

Describe and evaluate the main macroeconomic policies used by the Government and Central Bank of China over the last two years - Essay Example Monetary policy involves regulating the money supply and interest rates by a central bank with the aim of controlling and stabilising the currency (He and Chen, 2014). Over the last two years, china’s macroeconomic policies aim at containing inflation to 4% eventually, to contain real estate by bringing prices of houses down, to maintain a decent growth rate of about 8 to 9% and to preserve the value of China’s foreign assets (He and Chen, 2014). This essay discusses the monetary and fiscal policy as used by the government and Central Bank of China. China has used a proactive fiscal policy over the last two years. A proactive fiscal policy is a moderately expansionary policy, which creates demand and triggers economic growth by growing domestic demand (Zhang, Fan and Haan, 2010). The policy has over the period aimed at ensuring the steady growth of China’s economy, making proper adjustments to its economic structure, promoting reforms and benefiting its people. That said, the policy continues to try to maintain balance between enhancing economic growth, keeping prices stable and protection against financial risks. Unfortunately, China’s economy risks being stalled. This was seen in 2014 where the annual GDP growth hit a low of 7.4% (see figure 1), the lowest rate since 1990 (Wei, 2015). However, as many economic policy enthusiasts believe, continued use of moderately expansionary policy will generate positive results on China’s economic growth in the midst of slow export growth. The expansionary policy is aimed at spending to generate income. Build-up of development and infrastructure needs and vast fiscal resources have made China channel immense spending into the economy. China has in recent years has relied on its large population to provide the required demand for their products to generate the required income. Government expenditure has, however, been seen to mainly lie in the areas of education, healthcare and other social expenditures (Jia,