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This paper studies the wealth channel in China. Using the structural vector autoregression method, the authors find that a loosening of China's monetary policy indeed leads to higher asset prices, which in turn are linked to household consumption. However, the importance of the wealth channel as a part of the monetary policy transmission mechanism in China is still limited. China's response to the outbreak of the global financial crisis and subsequent downturn was quick in autumn 2008. The announced stimulus package - even though amounted to about 13% of annual GDP - was only one part of a policy package that was put in place to keep the economy on a stable growth path.
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