The Effect Of Payment System's Electronization On China's Monetary Policy

With the development and progress of the society, the central bank payment system is undergoing tremendous changes. The mode of payment is becoming more and more diversified, and the payment instruments are gradually transforming from commodity money, credit money to electronic money. With the endless emergence of new payment systems, the payment system is also experiencing the process of diversification and modernization. At the mean time, with a number of laws being introduced to serve the construction of electronic payment system, the related regulations have been perfected. Taken together with the wide application of electronic techniques in the economic field, especially the penetration of information network to the payment system, China's central bank payment system has changed dramatically, and has exerted influences on the transmission of monetary policy at all levels, which will definitely pose a challenge to the central bank for the formulation and implementation of its monetary policies.This paper has studied the electronization effect of payment system on the different parts of the transmission mechanism of China's monetary policy, drawn from both domestic and foreign literature, reviewed the development of China's central bank payment system, and finally analyzed the effect of the electronic payment system's implementation on monetary policy from different aspects, such as the implementation premise of monetary policy, money supply, monetary transmission mechanism and monetary policy effect. The author also put forward her own opinion on how can the Central Bank of China deal with the emerging challenges, improve the liquidity of the domestic financial market and therefore improve the regulatory mechanism of monetary policy.The author found out that the electronic payment system's development influenced monetary policy in many aspects. As for the implementation premise of monetary policy, the development of electronic payment system changed the monetary hierarchical structure; the quantity and proportion of quasi money were rising; more liquidity came into the stationary state and the economic stability was threatened. The new payment instruments has substituted for cash to a certain degree, expanded the connotation of currency, and also made the both the monetary multiplier, which was based on the legal deposit reserve rate, deposit reserve rate, and cash leakage ratio, and the circulation speed of currency increase. Therefore, the funds can be easily transferred through the system, which improved the settlement efficiency, but also increased the difficulty of metering money supply. From the perspective of monetary policy tools, the electronic payment system's high efficiency in putting money into circulation decreased the demand for base money, the traditional legal deposit reserve rate may also lose its regulatory role. At the same time, the large amount payment system's construction shortened the delay of open market operation, improved the efficiency of funds clearing and the market operation. In the transmission mechanism of monetary policy, the application of national check image exchange system reduced the public financing demand to certain extent, weakened the commercial bank's ability of money-creating and made the commercial banks pay more attention to the management of limited capital. As for the monetary policy effect, the electronization of payment system shortened the time lag of monetary policy, cleared the payment transaction's fluctuation and improved the bank's efficiency in the use of funds, but also put forward higher requirements to the bank's liquidity management. Therefore, in order to cope with the impact of the development of the electronic payment system, the central bank should draw lessons from the experiences of developed countries in payment system construction, timely introduces new payment systems, and constantly improves our payment system's functions. The central bank should also encourage payment tool's innovation, especially the non-cash payment instrument's innovation; continuously improve our payment service and strengthen the cooperation between departments; improve the price mechanism, establish reasonable interest interval and improve the liquidity management; improve the relevant laws, regulations and supervision mechanism, so as to provide the legal protection to the operation of the system and continuously improve our payment system. This paper takes the literature research method and is appropriately added some data analysis. The main research contents include:firstly, a brief introduction to the central bank payment system, such as the research results on the domestic and foreign payment system and the development process of China's central payment system; secondly, the electronic effect of central bank payment system on monetary policy from five different aspects; thirdly, suggestions based on the influences analyzed above and finally the conclusion.Previous studies show that, the electronization effect of the payment system on monetary policy is mainly reflected in the aspects of money supply and monetary tools. The innovation of this paper is that the author puts forward her own views on the basis of previous studies. The author thinks that the payment system's electronization effect on monetary policy is many-sided, comprehensive and not just confined to one dimension. Besides, despite the close relationship between the payment system and the monetary policy, the author doesn't think that we can exaggerate or overstress the role of the payment system in monetary policy. We should rationally treat the relationship between the two sides and maintain the independence of monetary policy. Because of the author's limitation of ability and knowledge, the study relating to the electronization effect of the payment system on monetary policy is not mature or deep enough, the consideration is not complete, either. For example, since electronic payment system began in 2002, there was only little related research and there was not a good comparison indicator for measuring the electronization effects. Besides, the related data are scarce, and the data mainly come from the website of the central bank, bureau of statistics, database of journals and secondary data; some conclusions are still to be explored. But on the whole, analyzing the electronization effect from multiple perspectives is very meaningful. In the future, I will study harder and strive to achieve a certain result.