Study On The National Debt Acting As The Leading Instrument Of Open Market Operation In China

As the intersection of fiscal policy and monetary policy, national debt which plays an important role in many countries' macrocontrol not only can make up the fiscal deficits, but also can work as an instrument of the monetary policy. Since 1998, Chinese government has recovered to issue the national debt. After that, the scales become larger and the term structure becomes more reasonable. These changes lay good foundations for the national debt becoming the instrument of central bank's open market operation. On 9^th April, 1996, The People's Bank of China employed T-bills to expand open market operations for the first time. As the open market operation is characterized as active,flexible,slight and reversible, The People's Bank of China tends to use it to control the currency when the macroeconomic adjustment in our country has became more indirect.This paper takes a view from the open market operation. Firstly, the author sets forth the related theory of the open market operation tool and analyses the current states and problems of it. Secondly, the author puts forward the criterion for choosing Chinese open market operation tool. By making comparisons among national debt,central bank papers and policy finance bond, the author draws a conclusion: the national debt should be the leading open market operation instrument in our country. Thirdly, the author analyses the problems of national debt, such as insufficient scale,unreasonable term structure and holders and imperfect market. Finally, the author studies how to develop the national debt in order to make it to become the real leading tool. Hopefully, this paper may contribute to our country's macro-economy adjustment.