This book is a systematic study of monetary policy and financial institutions in China during its decentralisation- and market-oriented economic reform. It contains substantial information on money and finance and the operation of financial institutions in China. More importantly, this book not only identifies the specific sources and processes, but also mechanisms, of the monetary expansion as the general features of monetary policy.

It establishes the link between money, bank credit and investment in fixed assets. Given lack of alternative channels of financial intermediation, monetary policy has been employed by the central government in playing the investment game with the local governments. Although Chinese policy-makers have been lucky in generally avoiding unmanageable excessive demand thanks to households' long-term saving behaviour, the accumulated liquidity risk increases uncertainty.

However, the available money can be utilised to facilitate needed ownership reform.