The Study On The Excess Liquidity In Commercial Banking System

Before2008, the overheated economy in China was considered to be caused by excess liquidity. The international financial crisis which broke out afterwards caused the suspect of the shortage of liquidity. And when Chinese economy started to recover gradually, along with house prices and consumer price index to go up further, excess liquidity in the economy began to appear within the academic field of vision.The economists and ordinary people did not expect the liquidity that plagued Chinese economy. Macro adjustment and control was helpless and extremely passive in facing the violent fluctuating of liquidity. So it is of great theoretical and practical significance for the design and use of macroeconomics and then the macro-control policy for our country which is full of desire for the economic growth at such a critical period of economic development.Liquidity is a financial concept, which refers to the ability of the successful realization of assets at a reasonable price and reflects the relationship between the time scale of assets and the price scale of assets. In the21st century, the financial concept of liquidity has been widely introduced into macroeconomics as an analytical tool. It will bring about the excess liquidity when this index shows that the liquidity is larger than a certain amount.First of all, this paper summarized the definition of excess liquidity made by domestic and foreign scholars based on facts. We pointed out the indicators that measure the excess liquidity, and made use of it to measure the current scale of liquidity in China and found that the size of our liquidity has emerged the excess. Because Chinese excess liquidity is caused by a variety of factors, so the paper analyzes the macro and micro causes of excess liquidity, as well as the special affects on the domestic market in the context of world financial crisis. Meanwhile, the paper analyzes the adverse affects on the implementation of monetary policy, macro-economic operation and operation of commercial banks which caused by excess liquidity.In order to resolve the current situation of weak macro adjustment and control, this paper analyzed the macro-control measures taken by the current Chinese monetary authorities in response to the excess liquidity and pointing out the inadequacies of these measures. Based on the above analysis and propose that the solution to those problems is to maintain rapid economic growth and prevent the flow may lead to reversal. Finally, both vertical and horizontal suggestions of control methods were given in response to excess liquidity. We also put forward proposals that the commercial banks should establish a modern banking system and management methods and increase product innovation to ease excess liquidity from the microscopic point of view.