China's Use Of The Statutory Deposit Reserve Ratio To The Implementation Of Macroeconomic Regulation And Control The Effectiveness Of Research

With the rapid growing Chinese Economy in recent years, problems started to burst from the year 2006: increasing growth rate on investment and trade surplus together with excessive granted loans positioned the problem. As a result, we had seen the pressure on inflation and the raising price on properties. In order to retain a healthier economy, People's Bank of China had raised the deposit-reserve ratio 18 times to 17.5% from July 2006 to June 2008 which reached the highest point in history. People's Bank of China intended to inhibit economic overheating, reduce the burden of economic development, but what followed on the implementation of the policy was the irrational slump in the stock market, price tumbling on real estate market together with the continuous rising inflation. Ever since the second quarter in 2008, the domestic exportation, the expenditure, the investment has showed obvious asthenia, small and medium-sized enterprises also faced with unprecedented crisis. Three months after the last action took to raise the deposit-reserve ratio, it was dropped suddenly. Facing the new crisis and the change of government's macro-control measures, questions about the monetary policies government had implemented had risen.This article discussed how much is the contribution rate to the economy by using the tightening of monetary policy raising the bank's reserve rate many times and how to view its validity is the key point which this article discusses. But this article qualitative analyzes the influence of raising the bank's reserve rate to the entire macro-control system. We have obtained the conclusion that the tightening of monetary policy by raising the bank's reserve rate is effective but not symptomatic. Then it quantitatively analyzes how the bank's reserve rate influences the money supply, and the conclusion is the bank's reserve rate has weak effectiveness to the money supply in our country. Two conclusions are the same. Because of the bank's reserve rate's multiplier effect, it was considered as the violent regulative tool. In our country , weak effectiveness is mainly decided by the bank's reserve rate system itself. Moreover, our country's bill market is not developed, the bank's reserve rate becomes the regulative tool naturally which is China's only choice. Therefore we must reform the bank's reserve rate system and thus to speed up the development of the money market.This article altogether is divided in five parts. The first part discussed the implication of bank's reserve ratio, the research background and the significance. The second part has compared the bank's reserve-ratio policy and the monetary policy's development path in China and foreign countries. The third part used the quantitative analytical method to analyze the effect on macroeconomic by using the bank's reserve ratio, then use the mathematical model analytical method to analyze the effect on money supply system, and to analyze the effectiveness of the monetary policy carried out. The fourth part examines the disadvantages of China's monetary policy as to adjust the bank's reserve ratio. The fifth part ponders the appropriateness of China's monetary policy, and the suggestions to better utilize the reserve-ratio tool. Fourth and the fifth part is a conclusion based on the analysis of the third part.