Economists are right for China...

Blind faith in the economic policies of the developed-world has landed China in trouble as far as debt and housing-bubble in the economy are in focus. By more and more easing through government bonds purchases China wants to lower interest-rate on public-debt to spend more on infrastructure, but by not lowering interest rate directly it wants to keep housing bubble and private-debt in check. Nonetheless the objective behind easing has been the devaluation of the yuan, everybody knows it. Chinese have relentlessly applied loose monetary-policy and think that it is a panacea for all ailments, but in not a less developed economy with supply-constraints, still, more money supply will always increase overheating and price-bubbles near full-employment. The economy has gone through many currency-re-denominations which is used to avoid too much increase in inflation and loss in the value of money, but, lately, it has also learnt to increase money-supply and depreciate the home-currency, and, give exports, employment and growth a push. The money from easing is flowing out of the economy after quantitative-easing which is responsible for higher interest-rates for the economy. Nevertheless, in the absence of capital-flight to abroad the money would have positively affected the scale of ability of banks to sell credit at lower interest-rate will increase. Higher capital inflows of foreign-investment (dollars and euros) have kept the yuan under pressure to appreciate, but PBOC is buying more and more dollars to keep the yuan depreciated. So at one place domestic capital is flowing out and at the other, in form of foreign-capital is flowing in. Not much difference.  There is a considerable trade-off between the gains from domestic monetary-policy and foreign-exchange-rate-policy, however the whole idea is to keep yuan devaluated which means more export competitiveness and growth in the face of slowing domestic-demand because of overheating and high interest rates. Economists are right when they lecture China on concentrating on domestic-demand.  China is trying to cash foreign demand at the expense of domestic-demand when its own expansionary monetary-policy and depreciation is inviting overheating in the domestic economy. To avoid this it needs tightening, and, not easing to avoid inflation and bubbles. More money-supply and inflation will hurt domestic value of yuan and demand within the economy.