During the period of 1996, China's interest rate marketization was officially launched. During the period of 10, based on the macroeconomic background of different periods, China's interest rate experienced two rounds of interest rate adjustment with its own characteristics. From 65438 to 0996-2002, there were eight consecutive interest rate cuts, and then a new interest rate increase channel was formed. The macroeconomic background and policy implications behind it are worth studying. Represented by the benchmark interest rates of one-year deposits and one-year loans of financial institutions, the two rounds of fluctuations are shown in Figure 1:
I. Eight interest rate cuts from 1996 to 2002 and their macroeconomic background analysis
From 1 May 19961to February 2, 20021,the RMB interest rate was lowered for eight consecutive times, with an average reduction every eight months, which was unprecedented. Through continuous interest rate cuts, the interest rate level has been adjusted from high to low, reaching the lowest level in more than 50 years since the founding of the People's Republic of China. One-year deposits decreased from 10.98% to10.98%, a decrease of 82%; One-year loans decreased by 57% from 12.24% to 5.3 1%. The average deposit interest rate was lowered by 5.98 percentage points, and the average loan interest rate was lowered by 6.92 percentage points. And generally speaking, the longer the term, the greater the decline. Five-year deposits are 2.07 percentage points lower than one-year deposits, and loans are 2.43 percentage points higher. These eight interest rate cuts have a wide range and high density. This paper analyzes the macroeconomic development and policy implications behind it, and makes continuous observation.
(1) 1996 cut interest rates twice: the anti-inflation ended.
During the period of 1993, China's rapid economic development was accompanied by inflation, which became an important issue in economic development. In response to this trend, the central bank raised interest rates twice in May and July of 1993, and decided to start the value-preserving savings business again in July to protect the interests of depositors. In order to further curb inflation and stabilize the market and economy, 10 and July raised the deposit interest rate 1995 twice. After three years of hard work, the macro-control with controlling inflation as the primary task has basically reached the expected goal, and the financial operation has basically maintained a steady development trend.
1996 is the first year of implementing the Ninth Five-Year Plan. The overall macroeconomic situation is good, but there are many problems at the micro level. This year's macro-control is still aimed at fighting inflation and achieving a "soft landing". However, at this time, the moderately tight environment that lasted for three years has brought about new changes in China's economy, with the price increase falling sharply, the investment in fixed assets slowing down obviously, and the increase in bank deposits is greater than the increase in loans. This situation is rare in China since the reform and opening up. According to statistics, in the first half of 1995, new deposits of financial institutions exceeded loans by more than 400 billion yuan. This created conditions and space for the central bank to lower the deposit and loan interest rates in May 1. The first rate cut is very limited, and the overall interest rate level is still high. Judging from the price changes, the national price increase rate of 1996 in the first half of the year was less than 7%, and it showed a continuous downward trend. Moreover, a considerable number of enterprises have not got rid of the loss situation, and some enterprises' benefits are still declining. In view of this, only three months after the last interest rate cut, the deposit and loan interest rates were lowered again.
The two interest rate cuts from 65438 to 0996 are still the continuation and fine-tuning of the previous anti-inflation. The main purpose is to appropriately reduce the burden on enterprises and promote the orderly and healthy development of the national economy. It is a major turning point in China's interest rate adjustment.
(B) 1997-2002 Continuous interest rate cuts: the gradual advancement of a prudent monetary policy
After 1996 successfully achieved a "soft landing", 1997 continued to show a good trend of "low inflation and high growth". With the gradual implementation of various national macro-control measures, the national economic situation continues to maintain steady and healthy development, and at the same time, some new features have emerged. First, the buyer's market has basically taken shape; Second, although the rate of price decline slowed down after two interest rate adjustments in 1996, it continued to fall with the downward inertia; Third, although the economic benefits of enterprises have improved, they are still not out of the Woods; Fourth, domestic demand showed signs of downturn, and the growth of total retail sales of social consumer goods slowed down. Therefore, the central bank decided to lower the deposit and loan interest rates of financial institutions on June 23, 65438/KLOC-0.
During the period of 1998, the international economic environment faced by China changed, and the financial crisis that swept through Southeast Asia gradually showed its influence on China. The continuous depreciation of the currencies of neighboring countries has brought great pressure to the stability of the RMB and expand external demand. At the same time, the rebound of domestic demand is not strong enough, and the consumer goods market still maintains the buyer's market pattern. The increase of retail price of commodities has been negative every month since September 1997. In addition, since Japan took the lead in cutting interest rates on September 9 (1998), the United States, Britain, Canada, euro zone countries and many Asian countries and regions followed closely, keeping the global interest rate at a very low level. In this international and domestic environment, the high-frequency interest rate cuts on March 25th, July 25th and February 7th, 1998, have become a part of China's economic marketization and internationalization requirements. The three downward adjustments have reduced the deposit interest rate of RMB by 1. 1.5 percentage points on average, the loan interest rate by 2.22 percentage points on average, and the deposit-loan spread has also narrowed.
By 1999, although GDP increased by 8.3% year-on-year and investment in fixed assets accelerated in the first quarter, some factors that restricted economic growth in the early stage have not been fundamentally solved, and it is still uncertain whether the economy as a whole will rebound. The main reasons are as follows: First, China's exports continued to decline. Countries affected by the Asian financial crisis have gained a price advantage in their exports because of the devaluation of their currencies, which has already shown its adverse impact on China's exports. Second, while household consumption is still depressed, household savings are still further enhanced. 1999 residents' savings deposits increased by 444.6 billion yuan in the first quarter, an increase of 155 1 100 million yuan year-on-year. Third, in terms of investment, the investment growth in the first quarter could not be sustained, because the effectiveness of fiscal policy declined month by month in the previous year, and the profitability of enterprises continued to remain at a low level. To this end, June 1999 cut interest rates again.
Since then, the economic growth of the three "economies" of the United States, Japan and the European Union has been declining continuously since 200 1, resulting in a continuous slowdown in the pace of world economic growth. This has brought obvious influence on China's economic development, especially the decline of foreign trade growth rate, which makes the power of foreign trade demand to drive economic growth decline to some extent. There are also some uncertainties in domestic economic growth. For example, although the proactive fiscal policy has effectively stimulated the investment demand, the private and social investment demand has not been fully activated; The growth of consumer demand is still unstable, and farmers still need to make great efforts to increase their income. In 200 1 year, China's GDP growth showed a downward trend quarter by quarter, and the consumer price index also declined for several months. On the basis of analyzing the international and domestic financial situation, the central bank cut interest rates for the eighth time since the beginning of 2002 1996.
Generally speaking, this round of sharp interest rate cuts is an important measure to adopt a prudent monetary policy to expand domestic demand in a timely manner in view of the problems existing in the microstructure of domestic economic development and the impact of the Asian financial crisis, such as slow economic growth, slow investment and consumption, sharp decline in exports, insufficient effective market demand, sustained negative price growth, deflation, etc.
Second, the four interest rate hikes from 2004 to 2007 and their macroeconomic background analysis.
After eight consecutive interest rate cuts, China's economy has developed steadily under the low interest rate environment, but new problems such as overheating and excess liquidity have also emerged, which has triggered a new round of interest rate adjustment.
(A) the first fine-tuning of interest rates in 2002-2005: the formation of interest rate channels
After SARS, some new situations began to appear in China's economy in the second half of 2003: the low price level ended and began to rise driven by food and food prices; The growth rate of fixed assets investment accelerated; Energy and electricity supply began to be tight; The real interest rate has been negative for nine consecutive months, which has caused many problems, such as the continuous decline in the growth rate of residents' savings deposits, the false prosperity of the real estate industry, and the large amount of funds leaving the "extracorporeal circulation" of the banking system. At the same time, the US dollar interest rate in the international market is constantly rising. From July 2003 to September 2004, with the introduction of a series of macro-control measures to reduce economic overheating, the traditional tools for regulating legal deposits and loans were delayed in many monetary policy operations adopted by the central bank, which gradually formed people's expectation of raising interest rates.
On June 29, 2004, the central bank finally decided to adjust the bank deposit and loan interest rates: the one-year loan interest rate of financial institutions was raised by 0.27 percentage points, and the one-year deposit interest rate was raised by 0.27 percentage points. The increase rate of medium and long-term deposit interest rate is greater than that of short-term, which reflects the policy intention of controlling the excessive growth of fixed assets investment by interest rate leverage. Although this adjustment is not large, it is an important signal to promote the reform of interest rate marketization in China. It is also the first rate hike since 1995.
(b) The interest rate increased slightly in B)2006-2007: the era of liquidity management
After the first interest rate hike, China's economic growth in 2005 showed the following characteristics: first, economic growth was characterized by heavy industrialization, which brought negative effects such as environmental pollution and energy waste; Second, the momentum of investment in fixed assets has been temporarily curbed; Third, the consumer market has stepped out of the impact of SARS, resumed growth, and its structure is more reasonable. In order to further consolidate the achievements of macro-control, maintain the good momentum of sustained, rapid, coordinated and healthy development of the national economy, and further play the role of economic means in resource allocation and macro-control, interest rates were adjusted twice in 2006. On April 28th, the benchmark lending rates of financial institutions were raised respectively, and the deposit and loan interest rates were also raised on August 19.
In addition, more importantly, during this period, China's economy experienced the strongest balance of payments surplus in history and the pressure of RMB appreciation. Foreign exchange has become the main part of China's basic currency, and the problems brought by the excessive growth of credit and the blowout of capital market prices have become the main contradictions of China's economy, so liquidity management has become the most important goal of the central bank. Since 2006, the statutory deposit reserve ratio has been raised five times. And issue bills at a high interest rate every month to tighten the excess money flow in the market. However, the effect of these measures is not obvious. Experts estimate that there are still nearly 600 billion funds in the market looking for exports. Under the passive situation that the adjustment space of deposit reserve is gradually shrinking, the central bank still chooses to raise interest rates on March 18, 2007 to promote internal balance and weigh the greater pressure of RMB appreciation that may be brought by raising interest rates. The impact of a small interest rate hike on the real economy is still small, mainly playing a warning role. Excess liquidity is still the primary problem facing the central bank.
Thirdly, it summarizes the basic factors that promote the two rounds of interest rate adjustment in China.
Through the analysis of the economic background and policy implications of the recent two rounds of interest rate adjustment in China, it is undeniable that interest rate is a powerful monetary policy tool, and the interest rate adjustment in China reflects the mileage of China's economic development on the one hand; On the other hand, it also reflects the characteristics and contradictions of the times in the development of China. The correlation between interest rate level and China's economic development level is constantly strengthening.
Theoretically, the main factors that determine the interest rate level are bank cost, average profit rate, loan term and loan risk, but experience shows that the interest rate level in the loan fund market fluctuates at a certain level, and the main factors that affect its fluctuation are the supply and demand of loan funds, social and economic operation cycle, expected price change rate, tax rate, historical interest rate level, international interest rate level, exchange rate and national economic policy. China's deposit and loan interest rate is determined by the central bank according to the development of the national economy and is an important means of macro-control.
Judging from these two rounds of interest rate adjustment, the basic factors driving China's interest rate adjustment are as follows: 1. Interest rate policy changes with the adjustment of macroeconomic conditions and objectives, and the focus of macro-control determines the direction of interest rate adjustment. Among them, the low interest rate policy has played a positive role in stimulating economic growth and restoring market vitality; The high interest rate policy aims to curb economic overheating and has played a positive role in controlling inflation. 2. China's interest rate adjustment is trying to adapt to the market, and liberalization and marketization are the trends that guide the characteristics of interest rate policy. 3. Interest rate policy is coordinated with other monetary policies, and the policy mix determines the fine-tuning characteristics of interest rates. 4. The external influence of economic environment needs interest rate adjustment to smooth its influence. 5. Macro-control departments use interest rate adjustment to show their determination and control intention, and transmit the "oath effect" to the society.
There are many factors that affect the change of interest rate. Grasping the dynamic reasons of interest rate policy provides a basis for analyzing the trend of interest rate change. Judging from the characteristics at this stage, China has entered a channel to raise interest rates, which marks a new era of liquidity management.