Research On Mechanism Of Interest Rate Marketization In China

Interest rate marketization is the most important reform agenda of Chinese financial industry and even macroeconomic. People’s Bank of China announced to liberate lending interest rate controlling of the financial institutions at July20,2013. From this on, the bank industry of China has entered a new era of market interest rates. However, the central bank and commercial banks has few knowledge about how to deal with different situations in the era of market interest rate. They are lack of theoretical support and still in the exploratory stage. Therefore, this article has a strong theoretical significance because it research interest rate marketization from the perspective of mechanism. It also provides supports for the future interest rate strategy of financial institutions.In this research, we set the interest rate marketization mechanism as the main line. First, trace the origins of Chinese interest rate marketization and sort its development process and historical significance. Second, analyze about the new situation on the international and domestic interest rate market in-depth. Third, create a dynamic gamble model using game theory to explain the market interest rate mechanism and its impact on the interest rate market and the bank industry. Finally, make an appropriate empirical analysis to gamble model simulation.Article adopts incomplete information dynamic game model to simulate the interest rate game behavior. As a conclusion, market interest rate mechanism will enable more efficient operation of the market interest rate. Loan interest rate will be more diversity and deposit interest rate will generally improve. On one hand, some commercial banks will raise or cut down loan rates to cover more target customers and finally form diverse levels loan interest rates system. In this way loan market will be more efficiency because business or personal need for more funds can be satisfied with their risk level and willingness to lend to obtain the corresponding loans. Self-regulation of the market will also play a greater role. On the other hand, while deposit doesn’t have direct impact on the overall economic as loan, but it is appearing as an important way for the bank to absorb the funds. Deposit interest rates will rise with the competition among bank financial institutions and trapped in a "prisoner’s dilemma". Finally, the sample data were collected to establish Bain market structure model, Panzar-Rosse model of market concentration and other empirical analysis of the findings.