China’s Monetary Policy Tools Optimization Under The Background Of Both Quantity And Structure Adjustment And Control To Economy In The New Era

Monetary policy refers that the monetary authorities use short-term interest rates, discount rates and other operational tools to affect money supplies, long-term interest rates and other intermediary objectives and further affect economic activities, so as to achieve the ultimate economic objectives, including full employment, price stability, economic growth and the balance of international payments. Monetary policy is an important way of China’s macroeconomic regulation and control, and the implementation of appropriate monetary policy in a specific period can promote the realization of economic development goals. However, in the new era of the transformation of economic developing mode and the optimization of economic structure, the formulation of monetary policy need to consider both the adjustment and control of gross economy and that of economic structure. In this context, the implementation of monetary policy has to meet the demand of economic growth to the liquidity and ensure that the economic structure can be optimized, but the optimization of economic structure may affect economic growth, social employment and other objectives in a certain period. Therefore, taking into account the volume and structure adjustment and control is just the problem that China’s monetary policy tools need to overcome.Presently, China’s monetary policy tools can be divided into three categories: quantitative monetary policy tools, pricing monetary policy tools, and supplemental type monetary policy tools. Quantitative tools include the deposit reserve, the central bank loans and open market operations, especially the central bank loans include relending and rediscount;pricing tools include the interest rates and exchange rates; Complementary tools include the direct credit control and the indirect credit control, while the direct credit control including credit quotas, business intervention, and interest rate restriction, the indirect credit control includes moral suasion, window guidance, and others. The implementation of various monetary policy tools plays an important role in promoting China’s economic growth and keeping the price level basically stable, but in the background of economic transformation which takes into account both the total and the structural adjustment and control, they still exist limitations. The implementation of the deposit reserve tools indirectly affects the real economy’s financing costs, don’t take into account the different regional financial strength, and the design of the tools is flawed; the central bank loans tend to gross adjustment and control, and the discount rates’price-guiding function is weak and its policy guidance function is not obvious; the policy subject of the main open market operations lacks independence, the trading subjects lack diversity, and the operating targets and modes exist defects; the interest rates effect in long runs and their structure adjustment control function lacks, the process of marketization of the interest rates slows, and the policy time lag is long; the unilateral exchange rates’appreciation brings adverse consequences, and the "exchange rate-interest rate" interactions would affect the policy’s expected result, In short, currently the gross problems and the structural problems coexist in China, and the gross adjustment and control function of monetary policy is still inefficient, so its structural adjustment and control function is more difficult.Thus, in the background of both gross and structural adjustment and control, China’s monetary policy tools should be optimized as follows, In the aspect of the deposit reserve tools, the central bank should take full advantage to stabilize M2/GDP, adjust the deposit reserve ratios timely, and improve the dynamic adjustment mechanisms of differentiated deposit reserve ratios; in the aspect of the central bank loans tools, the central bank should control the sum of the loans according to the goals of economic growth, and set differentiated lending rates and the amounts according to the requirement of the structural adjustment and control;in the aspect of the open market operations tools, the development of the bond market should be promoted to improve the proportion of the social direct financing, the operating modes and mechanisms of central bank bills tools should be improved, and the intensity and frequency of repurchases should be increased; in the aspect of the interest rates tools, a multi-level benchmark lending rates system should be designed, the floating range management of the the lending rates should be strengthened, and the buffet pricing abilities of the financial institutions should be improved; in the aspect of the exchange rates tools, the RMB exchange rate target zone system should be implemented, and the RMB exchange rates’ flexibility in both directions should be encouraged; in the aspect of the functional mechanism of monetary policy tools, a reasonable policy time lag should be determined, and the relevant subjects in the process of the implementation of monetary policy should make their accountabilities clarified. In addition, in the aspects of other policy tools, the supplementary policy tools should continue to implement the "window guidance" and other restrictive measures, so as to optimize the allocation of credit resources and guide the flow of financial resources to the fields of economic bottlenecks and weak links; the fiscal policy tools should implement preferential structural tax cuts policies to reduce the micro units’ transition costs, optimize the fiscal expenditure structure according to the requirement of the structural adjustment and control, and set up a product sales platform for the transforming enterprises.