The Effect Of China 's Bank' S Off - Balance Sheet Business On The Effectiveness Of Monetary Policy

Although Chinese banks had a later starting in developing Off-balance Sheet Activities (OBSA), they had fast pace. Nowadays, the share of OBSA in bank revenue has reached more than 20% and in the future, it will expand further in the future. As banks are the central nervous in financial markets activities and play an important role in the national macro-control especially in monetary policy, its changes in operation will affect the effect of monetary policy. Based on the assumption that monetary policy was effective, the article investigated the influence of the OBSA to the effectiveness of monetary policy by the intermediary and ultimate objective of monetary policy.The article used the method of the summary and inductive analysis, empirical analysis to study the OBSA. Firstly, it described the phenomenon that OBSA had a rapidly expanding in the Aggregate Financing to the Real Economy (AFRE) and the bank business revenue. Then it analyzed the reasons. Next it analyzed its impact on the effectiveness of monetary policy and found that OBSA could not only influence the money supply, but also influence the price and the economic growth by the transmission mechanism of monetary policy. Next, it used the VAR model to test the degree of influence from the OBSA.The consequence was that the OBSA’s greatest impact was on M1.Tt could reach 21% and sustain one year. The OBSA’s influence on price and the economic growth was relatively small, but it sustained longer. Finally, the article put forward some recommendations for the state and bank.