The Historical Transit And Future Perspective Of Transmission Channels Of Monetary Policy

Prior to the economic reformation in China, there only existed a credit policy but no meaningful monetary policy in the nation. As it is tightly regulated, the interest rate was not able to perform effectively, which inevitably forced the monetary policy to be transmitted through the credit channel. Since the mid 1980's, the government of China has established a central bank system and diminished to a large extent the scale of the credit, which has in turn reinforced the development of money market and capital market and created a leverage by using interest rate. The monetary policy has hence begun transmitting through multiple means of credit, interest rate and assets, instead of the sole source of credit policy. However, due to the lack of coordination between state-owned commercial banks and the entire monetary and financial system, the incomplete reformation of state-owned enterprises, as well as the beginning stage of capital market development, the means of interest rate and asset price are still very restricted, which has created major road blacks in the credit channel of the monetary policy. Looking from the goals of reformation, the interest rate and asset price channel should be the main channel in the transmission of our country's monetary policy in the future, but now the use of credit channel should not be underestimated. So in order to raise the efficiency of monetary policy, we should create more favorable conditions in order to effectively interest rate and asset price channel on the base of dredge the credit channel immediately.