Requiem for the interest rate controls in China

Rongrong Sun ()

Pacific Economic Review, 2021, vol. 26, issue 2, 139-160

Abstract: This paper reviewed the retail interest rate control deregulation in China over the period 1993–2015 to provide a preliminary assessment of the People's Bank of China's (PBC's) new operating framework. The interest rate controls triggered the development of deposit substitutes that banks used to circumvent the restrictions, which, in turn, drove deposits out of commercial banks. This gave rise to concerns about a deterioration of bank profits and a build‐up of financial fragility, which have pushed up the PBC's deregulation acceleration over the post‐2012 period. This study quantified the distortionary effects of these controls: disintermediation, a rising shadow banking system, and financial repression. Despite the official lifting of controls, retail interest rates are still subject to the PBC's window guidance and other pricing mechanism guidance. The preliminary assessment of the new interest rate corridor system is encouraging: Its bounds are effective most of the time.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1468-0106.12341

Related works:
Working Paper: Requiem for the Interest-Rate Controls in China (2018)
Working Paper: Requiem for the Interest-Rate Controls in China (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:pacecr:v:26:y:2021:i:2:p:139-160

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1361-374X

Access Statistics for this article

Pacific Economic Review is currently edited by Kenneth S. Chan and Yin-wong Cheung

More articles in Pacific Economic Review from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().