Transformation Of China’s Monetary Policy Tools Selection In The Open Economy

Since has joined the World Trade Organization, China kept a strong trade surplus for years. In order to maintain the RMB exchange rate basically stable, the central bank can do nothing but passively buy up the foreign exchange which was obtained by the large amount of trade surplus, simultaneously supply the RMB in the foreign exchange market. This becomes a new and main channel of currency supply in the open economy, and this kind of currency supplying is strongly passive and endogenic.From the perspective of central bank’s balance sheet, this paper summarizes that the central bank used to control different level money supply by the scalar type monetary policy tool. After a review of China’s monetary policy tool chooses, this paper divides China’s monetary policy operation into three stages, and we can conclude that the quantitative monetary policy tool is taken primarily; the pricing monetary policy tool is carried out as the auxiliary policy combination.Through analyzing the different quantitative monetary policy tools deeply with different time macroscopic currency situation, this paper summarizes the reason why a certain tool became the main force in each stage. The paper states that at present, our country mainly depend on raising the deposit reserve rate to freeze the liquidity on a large and deep scale, use open market operation to adjust short-term market liquidity, and coordinate to use the reloan and rediscount to adjust the partial capital needs. But, there are still some limitations about these commonly used quantitative monetary policy tools.Based on the analysis of the central bank monetary policy tool chooses, this paper puts forward a forecast about the monetary policy reforming. In nearly three years, China’s trade surplus have showed a gradually decline. The decline trend of trade surplus is expected to be the main feature of China’s foreign trade in the next few years. At the same time, financial disintermediation is continuously deepening with the continuous development of China’s financial markets. Change of these factors may affect the choice of the monetary policy from the numeric type to the price type. The effort over years has laid a foundation for the next greater use of the pricing monetary policy. However, to truly make a good use of pricing monetary policy also faces many problems. To solve these problems, the paper puts forward some suggestions and further research direction.