Chinese Interest Rate Market

The interest rate liberalization enables market forces to play a major role in determining interest rate, while the government gradually releases or removes its direct control on interest rate. The interest rate liberalization is an inevitable choice under the general trend of economic globalization in the world. Meanwhile, it is indispensable for Chinese financial system reform and development. The interest rate liberalization has substantial influence upon banks, enterprises and individuals. Therefore, it is of great practical significance to probe into and analyze the obstacles and future development trend of the China's interest rate liberalization reform. The successful accomplishment of the interest rate liberalization depends on the four prerequisites: effective financial regulation, stable macro-economic environment, well-developed micro economy and establishment of healthy financial market. Based on the experience of Japan's interest rate reform, this paper focuses on the evaluation of the status quo and difficulties of the China's interest rate liberalization reform and also proposes detailed thoughts and measures for the implementation of China's interest rate liberalization reform. At present, China's interest rate liberalization is at the critical stage, whereas it is affected by micro-economic factors such as distortions of financial market price system, non-standardized operation of interest rate controlling bodies, under-developed financial regulation and etc. Therefore, China's interest rate reform must be conducted gradually and in proper sequence. Reform in commercial banks should be facilitated. Modern enterprise system need to be built up and all the conditions for the implementation of interest rate liberalization need to be created. The market orientation system of China's interest rate should be further promoted when the liberalization process is accelerated along with the deepened financial system reform.