China's Treasury Cash Management And Monetary Policy Coordination

After 2000, with the reform of public finance, China has pushed several transforms, including departmental budget, treasury single account, treasury cash management, government procurement, etc. The main goal is to establish China's modern treasury system. Since these reforms, China's treasury account has increased rapidly, and reached 220 million Yuan in 2009. Too much money depositing in treasury leads to inefficient use of funds. On one side, fiscal departments have to pay high interest for government debts. On the other side, financial idle funds are not used effectively. In this context, to carry out treasury cash management work has become a pressing job.Treasury cash management is:after meeting the need of financial payment, fiscal departments through a series of financial management activities, to make treasury cash balances achieve minimum level and maximize return on investment. Because China implements "manager treasury system", fiscal income and expenditure activities require passing funds through the central bank. As an important node associated with fiscal pol icy and monetary pol icy, treasury cash management closely related with monetary policy. So good coordination of treasury cash management and monetary policy is extremely important, there are three main reasons:Firstly, for the treasury cash management, ensuring the safety and mobility of funds, the pursuit of fiscal sector is the rate of return of funds, but in the implementation of specific operation, the central bank concerns more about its potential impact on monetary policy, so fiscal departments and the central bank need to communicate timely to coordinate their respective goals. Secondly, central bank's treasury single account is generally the main account of fiscal sector, and monetary pol icy is formulated and implemented in central bank, with the increase of funds depositing in the treasury single account, central bank absorbs a large amount of money from other financial institutions, and reduces the total amount of funds available to the community, which increases the difficulty of monetary policy, vice-versa. Thirdly, if the government does not carry out effective treasury cash management, it will greatly restrict the development of money market, which is not conducive to the operation of market-oriented financial system, thereby affecting the effectiveness of monetary policy.In this paper, first of all, the author sums up China's treasury cash management activities in recent years, and briefly introduces treasury cash management and monetary policy coordination experiences of foreign countries. Secondly, regarding to the conduct of monetary pol icy and transmission mechanism, the author describes the situation in our country, and makes the theoretical analysis of relations of treasury cash management and monetary policy in China. Finally, by using existing data and introducing time series model, the author does an empirical study for that problem, and puts forward corresponding policy suggestions.This paper has three innovation points as follows:firstly, using treasury cash management as an entry point, it researches how to coordinate fiscal policy and monetary policy more efficiently. Secondly, through using qualitative and quantitative methods, it analyzes relationship between treasury cash management and monetary policy comprehensively. Thirdly, from the perspective of commercial banks'assets and liabilities structure, it discusses the effect path of treasury cash management to monetary policy, and raises a better way to measure the effects between treasury cash management and monetary policy.