Interest Rate Market, The Chinese Financial System In Transition

The core of Market-orientation reform is cut down the controlof price, because the market price can dispose of the economicalresources efficiently.Interest rate is the price of capital, which is the most essentialelement of investment and deposit. According to the rule of marketeconomy, the price may be decided by the demand and supply ofcapital of the bank,enterprise and inhabitation. The interest ratedecided by the government often depart from the market levelbecause the government can't dominate ample information that wasgrasped by the bank' enterprise and inhabitation. Even if thegovernment can hold information sufficiently, the policy wasdelayed-action.Since 1978, China has CQrried out Q serious of the stratagems ofreform to QboIish price control in product market. The governmenthowever, in financiQI market, commands mo5t of prices. The pricesystem WQS oppressed. In Qddition to, ChinQ will undertake the morecompetition of foreign financial institutions for sake of the entranceof WTO. There is no denying that it is a critical Juncture for ChinQto CQrry out market-orientation reform of interest rate now.The thesis comprises three parts:In fir5t part, the QUthor cIarifies the necessary ofmarket-orientation reform of interest rate QppIied with severaIcIassic Qnd modern theories. Furthermore, he compared four reformprocesses of different countries.In second part, the QUthor QnQIyzed conditions of the reform. Inview of trangformation of finance gystem, pIenty of obstructions willdeIay the procesg of reform. ^s far Qs the Quthor consider5, thereQre three Iinks of conditions: the first is body of interest ratemarket incIuding bank. enterprige and inhabitation. The second isscaIe Qnd diversification of financial market and manner of marketcontrol of the central bank, the third is macroeconomic situation.In the third part, the QUthor put forward orientation andstratagem of reform. He review5 process of reform Qt the beginningof 1978, Qnd gives some suggestions to the reform of China.FinQIly, in his opinion, QS the transformation of ChinQ's financesystem, the market-orientation reform of interest rate inevitabIyresuits in the profit of the groups who Qre in possess of the priviIegein the old system of or9QnizQtion. So the further of the reformdepends on reform of property rights Qnd distribution systems.