Time Period:
The People’s Bank of China (PBC) began functioning as the central bank in 1984. At the time, direct credit controls were used in the conduct of monetary policy.
It came with the abolition of credit ceilings and the expansion of open market operations.
And the intermediate and operational targets also switched to money supply and base money, with the adoption of a combination of monetary policy
instruments.
Recent years have seen the transformation from direct control through direct control through administrative measures to indirect controls through economic measures, while greater priority has been given to building a mechanism for macro-management.
The open market operations is the major instrument.
2. Second, interest rate system reform has been pushed forward, with the role of interest rates strengthened.
3. Third, the flexibility of the RMB exchange rate has increased as market supply and demand have played a bigger role in the formation of the RMB exchange rate.
On July 21, 2005, China adopted a managed floating exchange rate regime based on market supply and demand, putting an end to a basically fixed RMB exchange rate.
4. Fourth, financial markets have developed stably and the monetary policy transmission mechanism has further improved.
The development of financial markets not only directly impacts the transmission of monetary policy but also to a large extent determines the transition toward indirect approaches.
5. Fifth, there has been a breakthrough in financial institution reforms, resulting in heightened incentives for profit maximization and sensitivity to the indirect approach of monetary policy.
1. First, improving the RMB exchange rate formation regime.
2. Second, steadily advancing market-based interest rate reform.
The recent development of Shibor (Shanghai interbank offer rate) is an encouraging sign for interest rate liberalisation.
3. Third, pushing forward the reform of state-owned commercial banks and rural credit cooperatives.
4. Fourth, promoting further financial market development.
Thank you!
http://www.bis.org/publ/bppdf/bispap35h.pdf
(<The monetary policy transmission mechanism in China> Yi Gang)
http://www.cnfinance.cn/magzi/2010-04/02-8694.html
(《中国货币政策传导机制的现状、问题与改革》 王煜)