Cover IMF Working Papers
Interest Rate Liberalization in China
Author: Mr. Tarhan Feyzioglu, Mr. Nathan Porter, and Elöd Takáts
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 171
Language:
Chinese
Publication Date:
01 Oct 2010
DOI:
https://doi.org/10.5089/9781455215560.001
ISBN:
9781455215560
ISSN:
2789-536x
Pages:
46
Keywords:
WP; deposit rate; monetary policy; lending rate; bank lending
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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What might interest rate liberalization do to intermediation and the cost of capital in China? China’s most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund