China Economics Seminar

How does China’s Monetary Policy Committee influence monetary policies? - A brief history (1)

Nowadays we see overwhelming comments on China’s monetary policy in the local press every day. These comments could be from the government officials, college professors or research analysts, but one specific group of people have been paid particular attentions to – the monetary policy committee members of the People’s Bank of China.   Inspired by similar studies focused on the Fed’s Open Market Committee, we try to analyze the public remarks of the monetary policy committee members to gain some insights. This series of articles will briefly go through the structure and history of the Monetary Policy Committee of the People’s Bank of China and we will analyze the function of this committee as well as each member’s policy stance and the impact.


Before digging into the Monetary Policy Committee, it is probably necessary to give a brief retrospect on China’s central bank - The People’s Bank of China (PBOC). The PBOC was established on December 1st, 1948. After the banking system consolidation in the early 1950s, technically the PBOC became the only bank in mainland China from 1952 to 1978. It was responsible for both central banking and commercial banking in the planned economy period. During the economy reforms in the 1980s, commercial banking operations were split off into four state-owned banks and the PBOC started to act as a modern central bank.  But it was until 1995 that its central bank status was legally confirmed. The 3rd Plenum of the 8th National People's Congress passed the Law of People’s Bank of China on March 18, 1995. In 1998, the PBC underwent a major restructuring. All provincial and local branches were abolished, and the PBC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. In 2003, the Standing Committee of the Tenth National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services.

According to the Law of People’s Bank of China, keeping the currency value stable and maintaining economic growth are the two goals of the monetary policy. However, the central bank has multiple goals in real practice and controlling inflation is a prominent one.

The PBOC has three major instruments to implement its monetary policy target. Benchmark interest rate, reserve requirement ratio and open market operations. The PBOC has to get the admission from the State Council before they decide to change benchmark interest rates, but they have the authority to manage reserve requirement ratio and open market operations. Exchange rate policy also has a significant impact on monetary policies, because China’s capital account is strictly controlled and the currency is under a managed-floating system. The central bank has to buy US dollar and sell Renminbi, or do it reversely in the market to keep the exchange rate stable. Therefore it affects the money supply in the banking system. However either the PBOC or SAFE does not have enough authority to decide exchange rate policy independently.

In practice, the monetary policy department and the second monetary policy department are responsible for most operations of the policy tools. The monetary policy department is in charge of managing interest rates, doing open market operations and providing rediscount loans. The second monetary policy department covers exchange rate policies. Zhang Xiaohui and Li Bo head the two departments respectively.

Establishment of the Monetary Policy Committee 

Article 12 of the Law of the People's Republic of China on the People's Bank of China provides “the People's Bank of China is to establish a monetary policy committee, whose responsibilities, composition and working procedures shall be prescribed by the State Council and shall be filed to the Standing Committee of the National People's Congress”. On April 5, 1997, the State Council released Rules on Monetary Policy Committee of the People's Bank of China, which stipulates that the Monetary Policy Committee is a consultative body for the making of monetary policy by the PBC, whose responsibility is to advise on the formulation and adjustment of monetary policy and policy targets for a certain period, application of monetary policy instrument, major monetary policy measures and the coordination between monetary policy and other macroeconomic policies. The Monetary Policy Committee of the PBOC holds a routine meeting every quarter, usually in March, July, September and December, but the exact dates are not disclosed to the public beforehand. The opinions expressed in the meeting of the Monetary Policy Committee will be recorded in the short form of "meeting minutes", which would be released after the meetings are held. 


The monetary policy committee was founded in June 1997. In the beginning the Monetary Policy Committee was made up of 11 people: the PBOC's Governor and two Deputy Governors, a Deputy Head of the National Economic &Commerce Committee, a Vice Minister of the State Development and Reform Commission (NDRC), a Vice Finance Minister, the Administrator of the State Administration of Foreign Exchange (SAFE), the Chairman of China Securities Regulatory Commission (CSRC), two chairmen of the four State-owned banks ((Industrial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China) and an expert from the academia. In 2000, the chairman of China Insurance Regulation Committee (CIRC) joined the committee. In 2001, the Commissioner of National Bureau of Statistics was added into the group. 


Table 1 Monetary Policy Committee members (1997.7-2003.3)










Dai Xianglong

Zhou Xiaochuan



Zhang Zhigang


Wang Chunzheng


Xie Xuren

Zhang YC

Jin Liqun


Chen Yuan

Liu Mingkang

Liu Tinghuan


Shang Fulin

Xiao Gang


Zhou Xiaochuan

Wu Xiaoling

Li Fuxiang

Wu Xiaoling

Guo Shuqing


Not existent

Zhu Zhixin


Chen Yaoxian

Zhou Xiaochuan

Shang Fulin


Not existent

Ma Yongwei

Wu Dingfu


Liu Tinghuan (ICBC)

Wang Xuebing (CCB)

EZ.Zhang (CCB)

Shang Fulin(ABC)

Yang Ming sheng (ABC)


Shi Jiliang (ABC)

He Linxiang (ABC)

Liu Mingkang (BOC)

Jiang Jianqing (ICBC)


Huang Da

Wu Jinglian

Li Yang


Chen Long

Central Banking Seminar