The Liquidity Surplus Of Commercial Banks And Its Governance Mechanism In China

The liquidity surplus in commercial banks has attracted increasingly concern. Having observed the phenomenon of surplus liquidity and its harm, we can safely conclude that, to investigate the essence of the issue and thus to find a final solution will make significant theoretical and practical sense.The paper firstly introduces the present research in the issue of surplus liquidity inside and outside of china. Secondly, the author describes the bad effect caused by surplus liquidity. Thirdly, after assessing the character and the nature of the surplus liquidity and analyzing the primary cause of the issue in terms of period, the author uses a demonstratical methodology to identify that, the overstock of foreign exchange is the main cause of surplus liquidity currently. With the study of the cause, the author eventually puts forward a political suggestion to restrain and control the surplus liquidity in commercial banks.The core content of the paper focuses on the analysis of the cause and exploration of the solution of the issue-surplus liquidity in commercial banks. The reform of shareholding system in Nation-owned commercial banks can lead to a uprush in capital, making it the short-term cause of surplus liquidity. However, the long-term root of this issue lies in the unbalanced economical structure and the over investment, lower consumption, higher deposit, coming thereafter. Under such macro economic background, it is natural to form a huge sum of foreign exchange and over occupation of funds, which result in the surplus liquidity in domestic financial market and banking system. Correspondingly, we can use special national bond and special deposit to reclaim liquidity in the short-term. Besides, in the mid-term, the capital market reform and exchange system reform are critical important. In the long-run, we must update the economic structure, motivate the inner demand, get rid of the situation that economic growth heavily depends on the investment and export, and reduce the trade surplus. Undoubtly, they constitute a fundamental solution to the issue of surplus liquidity.