Research Of Interest Rate Marketable In China

The purpose of this paper is to explore the decisive factors and process of the interest rate liberalization in general, and the question of liberalization in China as well. Our study focus on some aspects such as the transition of the contemporary interest rates system, monetary policy, regulation method, operational strategy of the commercial bank as micro-financial unit, and the financial innovation.Interest rate liberalization is put forward under certain principles. Early interest rate theory of Adam Smith, William Pitt and John Lock hold that interest rate is determined by the supply and demand of the credit capital. The fundamental problem has been discussed from different aspects in the classical interest rate theory, neoclassical interest rate theory, Keynesian Liquidity preference theory and the neoclassical synthesis interest rate theory. Keynes suggest that the interest rate be put under the regulation of the monetary authority on the ground that the interest rate in chosed by the latter. While the classical and neo-classical interest rate theory argue that the interest rate is determined by the supply and demand of the capital in the market , and the interest rate liberalization as a result. Post-Keynesian economists absorbed critically Keynes' Liquidity preference theory and merge it into the framework of the market forming the interest rate. Mckinnon and Shaw and the neo-institutional finance economists illustrate the real requirement of the liberalization. Above all, liberalization is the core point of the theories, which form the theoretical base of the liberalization in home and abroad.The reform of the interest rate rule in China is undergoing at the background of globalization and liberalization. China's entry into the WTO has a deep influence on our economy: on one hand, we will further merge into the international financial market; on the other hand, foreign banks and non-bank financial intermediaries will pour in the Chinese money market. There is far-reaching historical significance in analyzing and learning the practices of foreign liberalization reforms and the influence upon commercial banks for our reform and the modification of our commercial banks.As the most important microeconomic component of the contemporary finance, the commercial bank should modify its operational strategies, seizing tightly andutilizing adequately the opportunities which is brought by the liberalization itself, and mitigating the risks in it, especially the interest rate risk. We should strengthen the founding of rule and management, develop financial innovations and new financial tools positively to prevent the forming of financial risks. The state-owned commercial banks should reform their property rights rule, operate independently, assume sole responsibility for their profits or losses, and preserve and increase the value of state property. Stock banks should compete with commercial banks in home and abroad positively, prevent and defuse financial risks and become one of the most active and efficient financial enterprises in China.