China’s Market-oriented Interest Rate Reform

Interest rate marketization is put the interest rate decision rights to financialinstitutions,financial institutions themselves according to the financial conditions andfinancial market trends to independently judge and regulate the level of interestrates.Interest rate reform is part of the financial system, the ultimate goal of the reform is toimprove the financial market, to achieve optimal allocation of resources, and promote thetransformation of commercial banks,to improve the quality of financial services, promoteeconomic growth.With the development of China’s financial system reform,market-oriented interest ratereform is not an accident, its inevitability including economic system reform of dualisticfinancial creation, financial reform lag, the macroeconomic regulation and control ofindirect control requirements, the requirements of financial institutions, independentpricing power and modern Internet financial reversed transmission market-oriented reformof interest rate, etc.China’s market-oriented interest rate reform has been carried out over thirty years,atpresent only the deposit rate determined and submitted to the state council for approval bythe people’s bank of China,became the last "bastion"of market-oriented interest ratereform.The smooth progress of market-oriented interest rate reform has achieved fruitfulresults, straighten out the interest rate transmission mechanism,build a system of interestrates about the People’s Bank of China and market interest rate system, built up a basicframework for the financial system. However, with the continuous improvement of thefinancial market system, China’s market-oriented interest rate reform has exposed theefficiency of interest rate regulation, financial regulation backward inadequate laws andregulations,the market exit mechanism is imperfect and reversed transmission of thedevelopment of the banking system and other issues.Abroad interest rate marketization reform experience mainly has: the success of themarketization of interest rates to promote basically has the characteristic of progressive, macro stability is the basic premise of market-oriented interest rate reform success,developed financial market is a prerequisite for successful marketization of interest rate,effective regulatory system is the basic guarantee of successful marketization of interestrate, deposit insurance system, etc. The perfection of market exit mechanism and so on.Currently only the deposit rate determined and submitted to the state council forapproval by the people’s bank of China,become the last "fort"of market-oriented interestrate reform. China’s future interest rate marketization reform goal is to let go of the depositrate regulation, improving the benchmark interest rate system, rationalize the interest ratetransmission mechanism, improve the commercial bank risk pricing power, etc. In theprocess of the reform is still to adhere to the principle of gradual.Thus,breaking up thedesignate run of interest rates, expanding the breadth and depth of financialmarkets,developing financial infrastructure, strengthen financial supervision, promote thedeposit insurance system construction, resolving the risks of banking system is necessary.