The Influence Of Financial Disintermediation On China’s Monetary Policy Transmission Channels

Financial disintermediation first appeared in America in the1960s, when the U.S. has issued Regulation Q, a certain regulation for the commercial bank interest rates. When higher than the interest rates of commercial banks, the market interest rates will lead to the banks’profit decline, shrinking market and interest income decrease, compress the traditional business of commercial banks’ profit space, and force the bank deposit funds into higher-yielding securities, thereby limiting the scale of the loanable funds of banks and forming financial disintermediation. Since1960s, financial disintermediation, the product of the capital market development, has emerged in western developed countries and caused a deep influence. Therefore more and more scholars participated in the discussion and the research of financial disintermediation.With the establishment of the securities market in China in the1990s, the financial system was more and more perfect. The development of non-bank financial institutions and the direct financing channels resulted in the appearance of the financial disintermediation in China. There are five main reasons:firstly, the development of capital market in China promoted the formation of financial disintermediation initially; Secondly, the acceleration of financial innovation further advanced the deepening of financial disintermediation; Thirdly, the progress of information technology and the development of the Internet financial also motived the deepening of financial disintermediation; fourthly, the influence of the macroeconomic abroad associated financial disintermediation greatly; Finally, non-market factors of financial disintermediation also had certain influence.Financial disintermediation mainly displays in several aspects: the decrease of individual and corporate deposits and the banking competition which strengthened traditional business shrinking; financing way diversification and the increasing proportion of direct financing; the changes of commercial bank loan structure, the shortened term of deposit supply and extended term of demand for loans. As the process of financial disintermediation has characteristics of long-term, transitivity and evolution, financial disintermediation in China presents some unique phenomena. On one hand, the demand disintermediation is stronger than the supply, in other words, the supply of commercial banks to deposits is stronger than the demand for loans of commercial Banks, showing the attenuation of the indirect financing channels. On the other hand, the demand of long-term funds in the commercial banks is stronger than the demand for short-term money, while the supply of short-term funding in the commercial bank is stronger than the phenomenon of the supply of long-term funds, showing the asymmetry of bank credit term. With the production of these phenomena, the financial disintermediation became more and more complex and exerted great impact of the transmission of monetary policy in China.This paper mainly collects from China’s Economic Internet Statistics Database, the People’s Bank of China’s Official Website and the National Bureau of Statistics Official Website and uses monthly data between January2002and December2002to set up VAR model, in order to compare the results of impulse response. First of all, financial disintermediation is helpful to dredge the interest rate transmission channels, speed up the efficiency of transmission channels of monetary policy on interest rates. However, as interest rate marketization in our country is not perfect and the small and medium-sized enterprise financing problem in the process of economic structure transformation has not been solved, the financial disintermediation has not played a positive role in promoting interest rate channels; Secondly financial disintermediation weaken the effect of credit channel. As the financial disintermediation impacts the traditional banking credit business and weaken the function of its capital intermediary, monetary policy in the process of credit conduction effect gradually reduce. The third, financial disintermediation strengthened the role of asset price transmission channels, basically because of the capital market development and the increasingly perfect assets pricing mechanism. Finally, the paper puts forward some personal opinions on how to actively cope with the effects of the financial disintermediation. From my perspective, China should continue promoting the marketization of interest rate, strengthen the role of interest rate in monetary policy transmission, as well as replace the money supply policy gradually as the intermediary goal. In addition, China should notice the collocation of monetary policy tools at the same time, strengthen the prospective effect of the monetary policy, and increase the regulation of non-bank financial institutions and the Internet finance.The financial system is the connection between monetary policy and the real economy. With the emergence and ever deepening of financial disintermediation, tremendous changes have taken place in it. Financial disintermediation also has significant influence on conduction of monetary policy, the traditional business of commercial banks and the revolution of financial channel. On one hand, financial disintermediation is of deep impact to original bank credit channel which is the primary way of monetary policy transmission mechanism. On the other hand, financial disintermediation, an inevitable product of the advancement of market economy, can facilitate the progress of economic effectively, in a well-established market. With the development of the interest rate market, in the next two to three years the rates on deposits may be deregulated and capital market will develop rapidly. And the disintermediation which emerges with it will change simultaneously, so we should be more concerned about the changes in the financial disintermediation, in order to make it good for economic growth.