Abstract: During the period of 2008-2009 when there was an economic contraction in China, the central bank increased money supply and reduced interest rates heavily. This policy effectively resisted the economic recession but led to rise of asset price and became a factor to cause inflation in 2010. During the 2010-2011 inflation, the central bank decreased money supply and raised interest rates on a large scale. Though this policy helped to control inflation, it did not resolve the problem of inflation caused by cost factors, at the same time it even brought in the pressure of credit shortage and economic contraction. The practice of the macro-monetary policy in the recent years proved that there existed the problem of over-intensity of the macro-monetary policy. Therefore, China needs to establish a new rule for the macro-monetary policy, i.e. to stabilize the growth of money supply and the interest rate, and to make proper adjustment on the money supply and the interest rate according to the difference between the real growth rate of GDP and the target growth rate of GDP and the difference between the actual inflation and the target inflation.

Key words: macro-monetary policy; money supply; interest rate; economic recession; inflation; rule of monetary policy