As a price based monetary policy tool, interest rate policy plays an important regulatory role in macroeconomic operation by affecting all kinds of demand. Since 1983, China has been steadily promoting the marketization of interest rates. The general idea is “first liberalize the interest rates of money market and bond market, and then gradually promote the marketization of deposit and loan interest rates”. At present, a relatively complete market-oriented interest rate system has been formed. The practice of China’s interest rate policy can be divided into four stages: 1) from 1983 to 1997: the people’s Bank of China began to exercise the function of central bank and centralized control of deposit and loan interest rates. The interest rate policy often carries out market regulation by directly changing the policy interest rates including refinancing interest rate, rediscount interest rate and deposit and loan benchmark interest rate; 2) 19972013: steadily promote the marketization of interest rate, and gradually liberalize the control of money market, bond market and deposit and loan interest rate; 3) 20132019: deposit and loan interest rate control was fully liberalized. With the creation of SLF, MLF and other monetary policy tools, the interest rate corridor was gradually established; 4) Since 2019: LPR reform has been implemented, the market-oriented interest rate system has been basically formed, and the monetary policy transmission mechanism of “monetary policy interest rate → LPR interest rate → loan interest rate” has been further dredged. Since then, with the normal operation of reverse repurchase and MLF, the market interest rate fluctuated around the central bank’s policy interest rate and gradually showed positive and effective changes.
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