The People's Bank of China during the global financial crisis: policy responses and beyond

During the economic crises of the last decade or so, China suffered limited losses; this is evident from studies of both the 1997 Asian Financial Crisis (AFC) and the 2008 global financial crisis (GFC). China has gone on to achieve unparalleled GDP growth since the second half of 2009, when most of the developed world still struggled to recover. Throughout this period central banks have widely employed various instruments to manage the various crises. Although the People's Bank of China (PBC) has adopted complicated facilities to mitigate contagion from the global market, China's uncompleted financial reform has initially limited its exposure to external shocks. This paper therefore explores the PBC's role and its emerging limitations by comparing its performance in these two crises. Although the PBC has assisted China to achieve its immediate target of economic recovery, economic imbalance has been in effect deteriorated from the longer-term perspective due to internal susceptibility to external shocks.