China's Monetary Policy Credit Conduction Channel Research

Monetary policy transmission mechanism is monetary policy instrument adopted by the authority to influence the intermediate target and eventually result in the change of real economy. Theories of monetary policy transmission mechanism is divided into monetary channel and credit channel, including interest rate channel, assets channel ,exchange rate channel and credit channel. The traditional theory of monetary policy transmission mechanism is used to analyze the impact of interest rates change on investment and savings from the perspective of those funding needs, but ignore the behavior of bank, which is the capital provider. Opposed to the theory of monetary channel which is based on the fully competitive market and the full possession of information, the credit transmission mechanism is based on imperfect market and asymmetric information.The existing financial system and market mechanism are consistent with the existence basis of credit channel theory. This paper summarizes the traditional theory of monetary policy transmission mechanism and mainly analyzes the credit channel of the monetary policy transmission of China from the aspect of bank loan.The second chapter gives an overview of theories on interest rate channel of the monetary policy transmission, represented by John Maynard Keynes, as well as theories on assets channel of the monetary policy transmission, represented by James Tobin and Franco Modigliani. This chapter also serves a brief introduction of theories on credit transmission mechanism from aspects of bank loan and the balance sheets of the enterprises. The core part of this paper is from chapter three to chapter six, in which qualitative analysis and quantitative analysis method are employed to research the application of monetary policy tools, the existence of credit channel, the difficulties of the monetary policy transmission mechanism of credit channel and possible solutions.The main conclusions have been achieved as followings: Bank loans and securities cannot be completely replaced in the asset side of bank balance sheets. Meanwhile, close substitutes of deposit liabilities are in deficiency in the liabilities ?prescription of bank balance sheet .Besides this, some enterprises highly depend on the bank loan. All of these are answerable to the existence preconditions of the credit channel of the monetary policy transmission; The conflict between monetary effect and expectation aim is partly because the infraction of monetary policy transmission mechanism; In a single financial system, the main reason of infarction in credit channel of the monetary policy transmission is the"reluctance to lend"of commercial banks; To clear the credit channel of monetary policy, we must first adapt to the trend of financial innovation, deepen the financial system reform and create a favorable external environment for SME financing.