Chapter1 Chapter2Chapter3Chapter4Chapter5

1. Introduction  Definition of the Interest Rates marketization.  Present situation of the Interest rate marketization in China

The interest rate control degree is high, the interest rate level and the structure are unreasonable, the bank independency is restricted. Interest rate control highlights the interest rate policy environment in our country. The level of interest rates decision and the policy of the differential interest rates formulation related all aspects of interest rate policy are strictly controled by government which demonstrates a high degree of planning and closed. First

The decision of interest rates levels has some subjective blindness, and the rate's flexibility is not enough. China's interest rate level is decided by the Monetary Policy Committee. The interest rate decision-making power is highly concentrated in the central government. The formulation and adjustment of rate has serious time delay effect. Second

Lack an effective market prime interest rate. Cheng Siwei, a vice member of the NPC Standing Committee, points out in a forum On November 1, 2003 : " the key to desiding the prime rate is the interest rate marketization. The interest rate structure, risk structure is after with the prime interest rate decision. The interest rates marketization is an empty talk without establishment of the prime rate. " The basis interest rate plays a key role in the whole interest rate system combine the ability check and supervision other interest rates, and can restrict other interest rates. In a sense, the prime rate led to the selection and identification of are the core steps of marketization reform in interest rate. Third

2. The problems of Interest rates Marketability in National Commercial Bank.  The structure of the asset and the debt are single.  The structure of the bussiness and income are irrational.  Interest rate level and the interest rate structure are irrational.  strict control of the interest rate and lacking of flexibility in interest rate utilization.

Mainly manifested in two aspects: First, the service primarily are the tradition saves and the loan business, the interest income accounts for the proportion is to be bigger; middle service variety is few, the scale is low, the technology content is not high enough.

3. The steps of the interest rate marketization in China Although the marketization of interest rates rates on China's financial system need to be further reform and perfect, but it also should be based on the development of the financial markets maturity of a planned and step-by-step manner. 3.1 Reform the interest rate management system. 3.2 Implement the interest rate marketization step-by- step. 3.3 Develop the short-term bond market. 3.4 strengthen the bank’s self-construction.

 First, the level of interest rate can be control or put to by the central bank, and the implementation is flexible  The second is to follow the objective economic laws, to optimize the allocation of funds  Third, it is able to mobilize all levels of interest rates banks management initiative.

 The first step in the adjustment of bank interest rates and the interest rate structure at the same time, re-establishing the central bank's benchmark lending rate for the interest rate system, the Central Bank to increase lending rate to commercial banks for deposits higher than the average cost. This step has been reflected, but they still perfect improve..  The second step, the central bank only requires that the maximum interest rates on deposits and lending rates lower limit, in this context allowed to float freely, allowing financial institutions more open and realize the market- oriented interest rates.  The third step, after joining the WTO, after a period of operation can be considered just a minority interest rates, all of liberalization, the basic implementation of the market-oriented interest rates.

4. The countermeasure of the State Commercial Bank. 4.1 Establish a scientific and rational pricing system of the financial products. 4.2 Increase development ability of the intermediate service product and adjust profit structure. 4.3 Promote the marketization of interest rates in stages. 4.4 Strengthen comprehensive cost management. 4.5 Establish an earlier interest rate risk warning system and avoid the interest rate risk.

 The first step, from China's current macroeconomic situation, although the rapid pace of economic development, but insufficient effective demand, the monetary policy transmission mechanism failed to first liberalize the lending rate, the lending rate such as liquidity, a year after full liberalization of lending rates;  The second step, according to the lending rate decontrol happens, it will open up some long-term deposit interest rates, such as one-year savings deposits, agreements on public deposits;  The third step, by the central bank, sum up experience, solve existing problems, the interest rate will be fully liberalized, which in 2008 realized the marketization of interest rates, and international practice.

 First, strengthen the interest cost management.  Second, strict control of business costs.  Third, set up special departments to clear non-performing assets and concentrate on cleaning up the disposal of bad loans.  Fourth, actively explore effective disposal of non-performing assets ways and means to improve the non-performing assets to be effective.

 First, formulate and administer the interest rate risk management post responsibility system, a clear division of labor, should fulfill responsibilities, strengthens the interest rate risk management responsibility to fulfill the situation the surveillance and the inspection.  Second, establish a set of comprehensive interest rates appraisals target system. According to this set of target, the determination commercial bank's interest rate risk condition, will forecast the market rate the future change tendency. When the interest rate risk surpasses the certain police demarcation line, this system can automatically send out the warning, the bank policy- maker according to the above takes the remedial treatment, will lose reduces to is lowest.  Third, innovate interest rate management tools which were suited our country characteristics. Unifies the Chinese reality the national condition and the state-owned commercial bank's reality, the development, designs set of policies permissions, the effective interest rate hedging tool, dodges the interest rate risk.

5. Conclusion The marketization of interest rates is an important element in China's financial system reform, we need to face the necessity and reality in China's reform of marketization of interest rates and speed up the process. From the analysis of China's marketization of interest rate, I conclude that the marketization of interest rates is a systematic project, we must adhere to proceed in an orderly way and follow certain laws. At the same time, the marketization of interest rate also brings the opportunity and challenge to our commercial banks, and we have to seize the opportunity, meet the challenges and accelerate the market-oriented interest rate, actively promote our national commercial banks, carry out shareholding system reform, establish a modern commercial bank management model, and to be the pioneers in the competition society.