The article explores how China's monetary policy affects economic growth and inflation. The researchers use a framework based on real-world factors to analyze the impact of policy on output and prices. They discover that China's monetary policy aims to boost GDP growth while controlling inflation, with different effects on the economy depending on its state. The study shows that M2 growth and bank lending play crucial roles in how monetary policy influences investment and economic activity. The findings suggest that China is gradually shifting towards using interest rates as the main tool for monetary policy.