| In September,2012, the12th China’s Five-Year Plan of Development and Reform of Finance Industry officially stated that " Strengthening the effect of price leverage such as interest rate, exchange rate gradually to promote the transformation of monetary policy framework from quantity-oriented one to price-oriented one."Throughout our current financial system, the main problem lies in that the base price of the market is still in the intervention and control of the government. Interest rate is the core of the financial market pricing mechanism. The Marketization of Interest Rate will undoubtedly be the top priority of the next step of our financial reform. However, the Marketization of Interest Rate does not mean complete "free rein". On the contrary, the Marketization of Interest Rate is actually a much higher regulation, which requests a higher level of government’s intervention of the economy.It means that, along the promotion of the Marketization of Interest Rate, we must build up a price-oriented monetary policy system. It also reflects the spirit of the3rd Plenary Session of the18th Central Committee of the Communist Party of China (CPC).Under this background, this paper first makes a systematic combing and summary of the changes of China’s monetary policy framework from the start of the reformation of the Marketization of Interest Rate. On this basis, combining China’s current macroeconomic environment, this paper, both theoretically and practically, discusses "The necessity of the transformation of the monetary policy framework" and "International experience on the transformation of the monetary policy framework". Then, the paper analyses "Which potential risks we may encounter during the transformation of the transformation of the monetary policy framework". Finally, the paper proposes several targeted policies recommendations. |
