The Lending Rates Of The Commercial Banks In China Decided To Open Conditions Mechanism

To provide a theoretical support for banks'pricing loan interest rate, the paper discuses the pricing regime of commercial banks'loan interest rate.In order to explore in depth China's commercial banks loan interest rate pricing regime under open conditions, the paper pays great attention to the combination between empirical analysis and normative analysis, the combination between qualitative analysis and quantitative analysis, the combination between theoretical analysis and policy-applied research, which would make the research closer to the reality and reflect the nature of interest rate regime.Under open economic conditions, implementing a market-oriented interest rate policy is an important sector for China's financial reform. It not only is the objective requirement of economic development, but also makes commercial banks to face a severe test on how to decide loan interest rate. Market-oriented interest rate reform requires commercial banks face the economic open condition and make a full research on interest rate formation, because rationally pricing interest rate is the core issue during the market-oriented interest rate reform.After outlining the important significance of formation regime of interest rate, and based on the definition of regime, the paper discusses the internal and external influencing factors of commercial banks'loan interest rate, explores how the influencing factors affect loan interest rate.If providing loan is regarded as a service offerd by commercial banks, the price of loan is decided by supply and demand in the market. Therefore the paper firstly discusses demand function and supply function of commercial banks'loan, and utilizes the demand and supply function to decide the interest rate.Even though internal factors play decisive role, external factors influence commercial banks'pricing procedure on loan's interest rate. Under open condition, external factors mainly cover two levels, one is micro level, another is macro level. The micro factors involve commerical banks'competition environment, for example, after China's financial market opening to the outside world, China domestic banks have to compete with foreign banks from supply side and foreign non-financial TNC compete with domestic non-financial companies from demand side, which makes supply side and demand side of China credit market more complicated and interest rate is influenced by more external factors. The macro factors involves exchange rate and international interest rate, which can influence commercial banks'loan interest rate from marco level.In micro level, China opens to the outside world and allows foreign commerical banks to develop business in mainland. If China domestic commerical banks and foreign commerical banks take competitive strategies in the credit market, the interest rate would be determined by the perfectly competitive market, and the interest of different commercial banks is under threat. But if they take leader-follower or collusion strategies, each side will get improvement of their benefit. The analysis shows that, because of existence of trigger strategy, the loan interest rate would be stable.Under the condition of open economy, entrence of multi-national companies makes the credit market more complicated. Since China economy is a dual economic structure, loan's demands vary greatly, which means that the analysis should be expanded from loan's demand side. The paper divides loan demand into urban demand and rural demand, eastern region demand and western region demand. The difference betweeen different regions not only make China economy has dual economic characteristics, but also affect commercial banks'decision on loan interest rate. After entering China market, based on economic strength, MNCs can enjoy the advantage in the process of financing. It means that MNCs can get finance through different channels. So if China's commercial banks offer credit to MNCs, they have to consider margin cost of MNCs'various channels of finance.Under the condition of open economy, exchange rate and international interest rate, as marco economic factors, influence China commercial banks'decision on interest rate. According to the theory of interest-rate parity, there is an internality connection between the exchange rate and interest rate. Even though China still explores the reform of interest rate and exchange rate regime, the paper finds that the two factors are long-term intrinsically linked, especially during the period of RMB appreciation.At the same time, all kinds of resources are allocated by market mechanism, and domestic loan interest rate and international loan interest rate are linked stablely. Based on research, the paper finds that loan interest rates between China and Amercia are linked for long term. It means that Amercican domestic loan interest rate can affect China's domestic loan interest rate.Combining with China's reality, the paper puts forward some proposals on determination of loan interest rate for commercial banks under open condition, like analysing the market condition scientificly, facing the market competition with rational attitude, subdividing credit market and making a decision with a global perspective.