Research On The Development Of Money Market In China

With healthy, long-term economic development and theconsummation of financial adjustment policies, financial market,especially the money market, has been much more important in theprocess of economic development. The money market, the mainfunction of which is to raise fund, has been the main market for thegovernment, financial institutions, enterprises and personal investorsto manage their assets. In this situation, how to take good advantageof money market under the brand new situation enjoys great practicalmeanings.The paper first reviews the development of the money markettheory from home and abroad after 1970s, "Money market connectsthe supply of money and the demand of money in short period of time,its main purpose is adding liquidity and supplement positions, thetransaction target of the money market is mainly the short-time creditinstruments", based on the above theory, the paper makes a researchon the development of money market in China from the aspect of thecapital moving and equilibrium.Secondly, the paper analyses the necessity of the developmentand perfection of money market theoretically. The development ofmoney market can lay a good foundation of the central bank, andmake the indirect adjustment instruments of the central bank moreeffective. In modern open economy, one developed money market,including the government bond market, inter-bank lending market andforeign exchange market, is a kind of strong protections from theoutside shock. The development of money market is not only thefoundation of a reasonable interest rate, but also the precondition ofthe effectiveness of the central bank's monetary policies in thecondition of a liberalized interest rate. The necessity of thedevelopment of the money market can be concluded as follows: first,the development of money market is the precondition of theMacroscopic adjustment policies' transformation;second, thedevelopment of money market benefit the liberalization reform ofinterest rate a lot;third, the development of money market can makemonetary policies more effective;fourth, the development of moneymarket can ease the bad effects of the direct regulation.Thirdly, money market once played an important role in theprocess of economic construction and development. The paperevaluates the overall effects of the money market in China, analysesthe money market's unreplacement function in the adjustment offinancial market structure and the operation of monetary policies. Thepaper also points out the institutional obstacles of the development ofthe money market by analyzing the behavior of government, financialinstitutions and personal investors.At last, under the background that the degree of financialopenness and marketization is increasing, the development of moneymarket should match the development of capital market and thestructural adjustment of financial system. Based on the above analysis,the paper gives the path of the development of money market in China,which can be concluded as follows: accelerating the construction ofmoney market;encouraging financial innovation which includingexperiences of foreign electronic money market, system and productsinnovation and etc., developing the Money Market Fund and theMarket of Notes, creating good credit environment;perfecting thecredit evaluation system by the help of the government;solving thefundamental problems in credit operations and creating a good ecoenvironment for the developing of money market.