The historical evolution of Chinese monetary policy.

Summary Over the past six decades, China has undergone a transition from a planned to a market economy. During the same period, a profound change has taken place in the instruments and implementation of monetary policy. However, so far, China's monetary policy differs considerably from that of developed market economies. During the period of the planned economy, China adopted the single bank system and the highly centralized credit management system. These systems allowed the People's Bank of China (the PBOC) to directly control the volume of liquidity issuance and bank transfers through the liquidity plan and credit plan in order to adjust monetary aggregates. During the period of economic transition, China gradually abandoned its one-bank system. Nevertheless, the PBC was not yet a truly independent central bank, because it retained some direct financing operations to support the development of non-financial agents. Although the PRC began to use indirect levers to adjust monetary dynamics, it continued to implement direct adjustment instruments. In 1994, when China began more extensive economic reforms, a truly independent central bank system was established, which was further improved in 1998. The PBOC has exclusively performed the functions of a central bank and has implemented its monetary policy mainly through indirect adjustment instruments. However, the PBC has not completely abandoned the use of direct administrative control over credit aggregates. China's monetary authority has been gradually strengthening the control of shadow banking system activities, centralization of monetary policy and its efficiency since 2014, out of fear of rising leverage and high debt.