Inflation Targeting Strategy in China

The Chinese per capital income is about 1000 per annum with regulatory and legal systems in dire need of reforms

For about one decade , china have maintained fixed exchange rate for Yuan which relative to the dollar . Yuan has been exchanging at 8 .28 per dollar for three years now . When the dollar appreciates or depreciates compared to other major currencies like pound and Euro , the Yuan faces equal amount of appreciation or depreciation

The Chinese central bank intervenes in foreign exchange market to maintain fixed exchange rates . China sells yuan

in exchange of dollars when the yuan demand increases and vice versa when the yuan demand decreases . The recent intervention by the central bank has prevented yuan from appreciating . The Chinese government has been buying dollars to increase their foreign reserves which have risen from 153 billion to over 360 billion . The accumulation of dollars has increased the China 's monetary supply though china has moved to reign in monetary expansion (Carare Stone 2003

The corresponding period 's record of real GDP growth and exchange rate

Stability

Hyperinflation conquered in 1953 which brought to an end war and land reforms . The first production census of china revealed that the GDP was underestimated in 2005 . The underestimation was as a result of failing to put in to account the rapid growth of the services sector

The recorded GDP growth rate in 2007 was 11 .4 . This was in the efforts of curbing the overheating economy . The China 's growth rate reduced in 2008 due to global economic crises . The Chinese government pumped Rmb 4 trillion as an economic stimulus to invest in fixed infrastructure and human capital . It 's not clear whether the package consist the current spending plan or its new plan

Year

GDP Index in real terms GDP...