Research On The Interest Theories And China's Reform Of Interest System

Interest rate is not only the most important variable in financial system, but also the most fundamental variable in market economy. How interest rate works depends on its mechanism. Therefore, the socialist market economy would be deformity if there had no the market-oriented interest mechanism. Interest rate's importance has been re-established in application of monetary policy especially since 1980's. It has become the core of a series of economy policies.The paper begins with the meaning of interest rate. Then explain there is a hot debate between Classicalism, Keynesiansim, Financial Restrain & Financial Deepening Theory and Neo-Keynesianism in the last century. Through an in-depth analysis, we can find that the different theories are logically consistent, even the standpoints of them are totally different. The key point is the level of interest rate and it proves that interest rate is decided by the market. The dispute originated from the un-linear relationship between interest rate level and economy growth and the different research views and methodologies. Furthermore, this thesis discusses the influences of interest rate on macro-economy indexes and micro-economy bodies. So this explains further the interest rate can adjust economy.Those analyses make the basis for how to improve effect of interest rate policy. However, interest rate policy is affected by other factors, such as economy system and history. After it summarizes experiences and lessons of other countries' interest rate system's reforms, the thesis discusses the circumstance of China interest system history. By the review of China interest system history, we can see that the low level of interest is determined by the Chinese economic development and maintains stable during the gradual reform process. But as the deepening of economic reform and entry into the WTO, the efficiency loss caused by the old interest system is increasing. It is necessary to prompt interest system reform. Based on Chinese interest reform, the paper respects the course of China interest liberalization, excavates the inner logic of China interest reform, analyzes the correlation and sensitivity between the interest rate and macro-economy target, indicates the current nodus of China interest liberalization, and proposes the micro market fundament and macro condition which need to be improved further.