Research On The Impact Of Interest Rate Liberalization On The Profitability Of The Financial Industry

The interest rate liberalization reform in China is carried out under the background of the continuous advancement of Chinese economic system reform and the growing development and opening of economy in China.The interest rate liberalization is not only an important part of the establishment of socialist market economic system,but also an important achievement of the reformation and development of Chinese economic system.It is of great significance for improving socialist market economic system and further deepening financial reform in China.China has liberalized the interest rate controls on the most stringent types of deposits since October 24,2015,it is widely regarded as a key point in the completion of the interest rate liberalization in China by many documents,but this is not true.Although deposit and lending interest rates have been liberalized,the current mechanism of benchmark interest rate,the yield curve,the independent and reasonable pricing of financial institutions,and the level of internal risk control management are still gradually adapting,improving,and maturing.The liberalization of interest rate in China has a long way to go.With the deepening of the process of the interest rate liberalization,the level of interest rate liberalization has continued to increase,which has affected all aspects of the financial system.In this situation,how the profitability of the financial industry will be affected,how this impact would be transmitted,and what self-revolution and financial innovation the financial institutions should do to deal with the adverse impact need to be further studied.Therefore,on the basis of the interest rate liberalization reform,this paper will study the representative fields of banking,securities and insurance industries,discuss the impact of the interest rate liberalization on the profitability of these industries under the background of the interest rate liberalization and then put forward policy suggestions,which provide some important reference for how the financial industry can develop better in the context of the continuous deepening of interest rate liberalization.This paper comprehensively examines the basic theory and reality of the interest rate liberalization.On the basis of the measurement of interest rate liberalization process,it studies the impact of the interest rate liberalization on the profitability of the financial industry.The main contents of each chapter are as followed:The 1st chapter mainly introduces the background and significance of the topic,systematically cards the existing literature and research results,mainly introduces the theoretical basis of the paper from the aspects of interest rate theory,interest rate conduction theory and financial innovation theory,and defines the main economic sphere.The 2rd chapter introduces the development status and key issues of interest rate liberalization from the international experience,the impact on our financial industry and the current challenges.The 3th chapter investigates the development of interest rate liberalization in China and constructs an interest rate liberalization index on the basis of the measurement of interest rate liberalization process,which was used to describe the level of the process of the interest rate liberalization in China.From the 4th chapter to the 6th chapter,the paper analyzes the impact of interest rate liberalization on the financial industry in China.On the one hand,it sorts out the existing literature and makes the influences on the banking,securities and insurance industries under the background of the current interest rate liberalization collated and reviewed.On the other hand,it describes the current situation combined with the overall data of the financial market in recent years and the business circumstance of the three sub-industries of banking,securities and insurance industries.After that,it conducts the empirical analysis from the three most representative areas of the financial industries,including the banking,securities and insurance industries,and arrives at a conclusion that the interest rate liberalization has a significant impact on the profitability of all the three industries,but there are still differences among them.In the 7th chapter,combining with the stage of the interest rate liberalization and the current status of the development of the financial industry in China,the author puts forward some countermeasures and suggestions for deepening the reform of the interest rate liberalization in China,from the aspects of perfecting the corporate governance of financial institutions,strengthening the ability of financial institutions to set the price independently and reasonably,improving the level of risk management,cultivating the benchmark interest rate and yield curve,and making the market-based mechanism for setting rates sound.The innovation of this article lies in three aspects.Firstly,the innovation of research perspective.In the existing literature on the impact of interest rate marketization on the financial industry,most of them are relating to a certain industry,including realistic descriptions,theoretical analysis,some important conclusions and policy recommendations.The literature applying mathematical analysis methods pays more attention to individual financial sub-sectors,which is a longitudinal analysis of the financial industry.On the basis of measuring the level of interest rate liberalization in China,this paper focuses on the impact of interest rate liberalization on the profitability of major financial industries.It examines the situation of three industries,namely banking,securities and insurance.The vertical and horizontal combination research comprehensively studies the impact of interest rate marketization on the profitability of the entire financial industry,and reaches some comprehensive conclusions and policy recommendations.Secondly,the innovation of research methods.Based on the theoretical and practical analysis,this article particularly emphasizes empirical analysis,involving a large number of theoretical models with a large amount of time series data and cross-section data.The empirical analysis,measuring the degree of marketization of interest rates and its effects on the profitability of banking,securities,and insurance industries,results in some scientific solutions and related policy recommendations.In addition,attention to mechanism research.This paper values the study of interest rate marketization on the internal operation mechanism of banking,securities and insurance industries,and analyzes the impact of interest rate marketization on the profitability of some specific financial products,which makes the research more in-depth and closes to reality,and supplements the lack of research from a macro perspective.The disadvantage of this paper is that the research issues are important and complex,but I am engaged in the actual work of bank,the theoretical level is not high enough,the theoretical analysis of some issues needs to be further studied.In addition,it is difficult to obtain more detailed and comprehensive data,which affects further scientific analysis.This paper refers to a large number of documents,the financial statements and the data from annual reports of the three sub-industries and their representative enterprises.It selects the same explaining and explained variables,and keeps the choice of control variables almost same,which enhances the comparability of the profitability among the three sub-industries.It is better to provide readers with a unified view,which could help readers to comprehensively consider the impact of interest rate liberalization on the profitability of the financial industry.Here is the shortcoming that it is quite difficult to obtain more detailed and comprehensive data,which may have negative effect on the further analysis.