On The Liberalization Of Interest Rate In China

It is a very important sign to allow market forces to play a greater role in China's transition economy, which is from a planning economy to a market one with socialist characteristics and the integration of global economy. The reform in the liberalization of interest rate is an urgent matter which needs to be solved. Based on this perception, the purpose of this paper is to put forward suggestions of how to restructure liberalization of the interest rate. The paper is divided into 5 chapters as follows:Chapter 1 begins by looking at the definition of the rate, and then discusses systematically the different schools of thoughts on which the interest mechanism reform of China is based and their important use for reference. This section mainly discusses two different types of forming system of interest rate, and the meaning of interest rate liberalization, including its general meaning and its specific meaning for China.Chapter 2 analyzes the situation of the interest rate system in China, and points out that the system is not reasonable. There exist at least the following three reasons: first, the forming system is not illogical; the second, the level of the interest rate is not illogical, and the third, the structure of the interest rate is also not reasonable. Based on further discussion, the author's explanation is that the state-owned property right is a deep-rooted resource. Moreover, the author makes a comprehensive analysis of the offset effect on the economy caused by the illogical rate system.Chapter 3 mainly discusses the procedure and necessary conditions of the interest rate liberalization in the context of the current situation in China. The author sets two objectives for the rate reform. One is a short- term goal and the other is a long term one. According to those two objectives, a concerned description of speed, time, order and conditions of the rate liberalization is offered.Chapter 4, mainly discusses the risks, which will probably be brought about by the liberalization of the interest rate. Such risks could include the rate increase at the beginning of interest rate liberalization, the intensified competition in financial market, the cost increase of enterprises, the closing or downsizing of commercial banks and the government losing control of the interest rate.In chapter 5, considering the situation and the features of China's financial reforms, and according to the experiences and lessons from the other countries, the author gives her suggestions on how to guard and control those risks mentioned in chapter 4.