The Cultivation Of SHIBOR As The Benchmark Rate

During the 14th National Congress of the Communist Party of China in 1993,the party proposed that the long-term goal of China's financial system reformation is to establish a mature,market-based interest rate system.Since then,China has accelerated the process of interest rate marketization.A mature interest rate system must have a market benchmark interest rate which can reflect real supply and demand condition of money.January 4,2007,the People's Bank of China introduced Shanghai Interbank Offered Rate(SHIBOR),aiming to build our benchmark interest rate for money market and facilitate the interest rate transmission mechanism of monetary policy.This paper firstly analyzed the benchmark interest rate system of our country,compared the characteristics of pledged repo rate and interbank interest rate,and found that SHIBOR is the best choice of benchmark interest rate.Then conducted a qualitive analysis from the aspect of quoting,pricing,supervision and some other factors,followed by a quantitative analysis of SHIBOR's marketability,representativeness,robustness,conductibility and controllability.We found SHIBOR has the basic features needed to become the benchmark rate,but it needs to be improved from the perspective of representativeness and conductibility.The construction of the benchmark interest rate is inseparable from the marketization of interest rate and the construction of a national monetary policy transmission mechanism.Benchmark rate is the central part between official rate and monetary policy medium target.This paper analyzed the evolution of interest rate marketization both in Britain and the United States and their respective monetary policy mechanism,summarized the experiences of benchmark rate construction from the perspective of financial market and transmission mechanism.After analyzing the process of interest rate marketization and monetary policy in our own nation,we conducted a brief comparison with the UK,leading to a conclusion that higher degree of liberalization,financial innovation,smooth interest rate transmission mechanism are important factors to build a benchmark rate.Based on previous analysis we proposed some policy advices to cultivate a money-market benchmark rate from the perspective of financial market,monetary policy transmission mechanism and operating mechanism of SHIBOR.Our government should keep reforming the exchange rate regime to promote the two-way transmission mechanism of interest rate and exchange rate.On the other hand,enhance the guidance and relevance of SHIBOR with open market operations are effective ways to show the policy intensions of central bank.