China's Central Bank Independence And Financial Regulation

The essay chooses central bank independence and financial supervision to look into the status of PBOC. The essay plans not only to differentiate the status of PBOC’s central bank independence and financial supervision, but also to find out some structural problem deep-hidden, so that some proposals could be provided to promote the situation. Above are the basic purpose and expectation of the research.In the process of searching on central bank independence and financial supervision latest researches, the essay has found out that central bank independence and financial supervision have some hidden logical relationship between each other although they seem to have none. When initially established, most central banks held the accountability of "bank of government". As time passed by, they also developed the accountability of "bank of currency" and "bank of banks" and became combinations of those accountabilities. And among those accountabilities, the accountability of "lender of last resort" became the core accountability of central bank, as other accountabilities such as currency policy, central bank independence and financial supervision derivatives from it. Central bank independence and financial supervision are developed as the guards of central banks as "lender of last resorts" against the possible moral hazard from the government and commercial banks, which would make the systematical risk of financial markets higher. And as such, central bank independence and financial supervision should exists as well as "lender of last resort" since they ought to be protecting "lender of last resort" to be more effective and efficient. Above is the basic analytical framework of the essay. They essay believes that PBOC meets fairly low status of both central bank independence and financial supervision, which might cause possible more risky behavior of the government and commercial banks, which would damage to the stability of financial market.The essay has drawn the conclusion that PBOC meets fairly low status of both central bank independence and financial supervision, which does not match its accountability of "lender of last resort". This problem might cause the accountability of "lender of last resort" be abused and raise the systematic risk of financial market and cause even more problems. The essay proposes that PBOC’s central bank independence be raised, and financial supervision be recovered, so as to make use of currency policy to take the accountability of "lender of last resort" in better way...