China Finance Industry Issues Discussed Fully by China's Economy & Policy-Gateway International Group in its New Studies

21 Sep 2012 • by Natalie Aster

Direction for Interest Rate Liberalization in China. The main goal of interest rate liberalization is to establish a mechanism whereby deposit and loan interest rates in financial institutions are determined by market supply and demand, to regulate and guide market interest rates through the use of monetary policies, and to make the market play a leading role in allocating financial resources.

Promoting Interest Rate Marketization in China. The process of interest rate marketization has had a profound impact on Chinese economic and financial operations. On June 8, the central bank started marketizing interest rates while cutting them at the same time; the upper limit of the floating range of deposit rates for financial institutions was adjusted to 1.1 times the benchmark rate, and the lower limit of the floating range for loan rates was adjusted to 0.8 times the benchmark rate. This major financial reform has aroused widespread concern; this paper provides an analysis of interest rate marketization in China.

The Impact of Interest Rate Marketization on the Trust Industry in China. The so-called interest rate marketization process is designed mainly to establish an interest rate formation mechanism, determined by market supply and demand, for deposit and lending rates of financial institutions. Through the use of monetary policy tools to control and guide interest rates in the market, the market mechanism will play a leading role in the allocation of financial resources. At the same time, the trust industry is the forerunner in promoting interest rate marketization, and it will also usher in new historical opportunities and challenges in the context of accelerating the interest rate marketization process.

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