Comparison Of Financing Between The Interest Rate Regulation And The Interest Rate Marketization

Interest rate is the price of money, its essence reflects the level of efficiency of resource allocation. China has long control of interest rates, which is the performance of financial repression and financial constraints. Financial repression and financial constraints both are required to regulate interest rates, the difference between them is that the former makes government seized the rent directly from the financial system, while the other is to create financial institutions and corporate rental. Owing to our country adopted a gradual approach to reform, the overall effect of financial liberalization cannot in one step, in the process of financial deepening, financial repression, financial constraints and market phenomena exist together, namely interest rate controls and a certain degree of market coexist. Thus, compared to the impact on corporate financing, risks, costs between the interest rate market and interest rate controls, and compared to the performance of market financing subject between different institutional conditions, can help us better understanding how to better conduct business financing under different conditions, as well as we can make relevant recommendations from the perspective of market financing subject to market-oriented reform of interest rates. The market subjects studied in this paper are the local government financing platform with serious debt burden and the small and middle enterprises(SMEs) with financing difficulties, large enterprises not to be discussed.This article lists a large number of data(if no special instructions, all the data come from WIND), through descriptive statistical analysis, the financing, risks, costs of market financing subject under different regimes were compared. First, sort out the financial theories about the developing countries and describes the corresponding policy options and the process of marketization of interest rates, in order to establish the theoretical and practical basis for the subsequent analysis of the text, followed by local government financing platform and SMEs respectively in the specific comparative analysis in the two kinds of interest institution. Finally, concluding remarks and made recommendations accordingly.Through comparative analysis, this paper argues, market-oriented interest rate changes business conditions of financing, risk, cost in the interest rate controls, specific performance of each body is different. In the interest rate regulation, market financing subject obtains more funds from banks and there is rationing of funds, in the market conditions, the company’s more diversified financing, financing risk and financing costs overall decline. Overall market-oriented interest rate makes interest rates can actually reflect the cost of capital, reducing the rent opportunities and improve the allocative efficiency of funds, but after comparison, market financing subject in the market conditions also existed some constraints, such as the presence of a large number of interest rate insensitive subject, the total size of the credit subject to government control, competition in the financial institutions are not sufficient, the threshold of stock market is too high and interest rate reform also need to be supported by a number of supporting policies. Of course, these complementary measures itself can be seen as a portion of the interest rate market.