Overview - RMB benchmark interest rate

The benchmark interest rate is the interest rate with a general reference in the financial market, and the level of other interest rates or the price of financial assets can be determined according to this benchmark interest rate level.。The benchmark interest rate is one of the important prerequisites of interest rate marketization, under the condition of interest rate marketization, financiers measure the cost of financing, investors calculate investment income, as well as management's macroeconomic control, objectively require a generally recognized benchmark interest rate level for reference.。So, in a sense, the benchmark interest rate is the core of the formation of the interest rate market mechanism.。

Market economy countries generally use the central bank's rediscount rate as the benchmark interest rate;。The formation and movement of market interest rates are based on the level and trend of interest rates.。

Planned economy countries, formulated by the central bank。In China, the interest rates on deposits and loans set by the People's Bank of China for state specialized banks and other financial institutions are the benchmark interest rates.。In China's interest rate policy, the one-year deposit and loan interest rate has the function of a benchmark interest rate, on the basis of which other deposit and loan interest rates are determined by compounding.。

Basic Features - Previous Adjustments to the RMB Benchmark Interest Rate

(1) Marketization

It is obvious that the benchmark interest rate must be determined by market supply and demand, and not only reflects the actual market supply and demand situation, but also reflects the market's expectations for the future;

(2) Basic

The benchmark interest rate is in a fundamental position in the interest rate system and the price system of financial products, and it has a strong correlation with interest rates or the prices of financial assets in other financial markets.

(3) Transmissibility

Market signals reflected in the benchmark interest rate, or regulatory signals from the central bank through the benchmark interest rate, can be effectively transmitted to other financial markets and financial product prices.。

From general international experience, only the interest rate of financial products with reasonable structure, high reputation and strong liquidity can be used as the benchmark interest rate.。

Impact of interest rate hikes

The impact of the increase in the interest rate on the housing market.

1. It means that the country's economy is overheated, there is more money in circulation in society, purchasing power is too strong, and prices are rising too fast.。

2, deposit rate increase is to encourage you to put money in the bank, reduce the amount of money in circulation in society.。

3, the loan interest rate increase is to limit you to the bank to borrow money, also reduce the amount of money in circulation in society.。

4, the purpose is to curb inflation, the price index down, this is only a kind of financial instruments, as well as: the central bank issued bills, raise the bank's ordinary reserve requirement ratio, etc., the purpose is the same.。

China benchmark interest rate

I. Source

The prototype of China's benchmark interest rate, which financial markets have been waiting for for a long time, was unveiled in January 2007, and the "Shanghai Interbank Offered Rate" ("Shibor"), released by the China Interbank Lending Center, was officially launched.。With Shibor this rod "yardstick," the central bank's financial macro-control measures can be more accurate and effective, can also be used as a tool of unified weights and measures, to promote the marketization of interest rates, for the central bank's monetary policy to create conditions for price-based control.。

Shibor is the arithmetic average interest rate determined by the calculation of the RMB interbank offered rate independently quoted by a quotation group of banks with higher credit ratings, which is a simple interest, unsecured, wholesale interest rate.。Shibor varieties currently available to the public include overnight, 1 week, 2 weeks, 1 month, 3 months, 6 months, 9 months and 1 year.。

The Shibor Quote Bank Group now consists of 16 commercial banks。Quote banks are primary dealers in the open market or market makers in the foreign exchange market, and are relatively active in RMB trading and well disclosed in the Chinese money market.。

The formation of Shibor is like this: each trading day, the National Interbank Lending Center according to the quotations of each quoting bank, excluding the highest and lowest two quotations, the remaining quotations for the arithmetic average calculation, to arrive at each term varieties of Shibor, and 11: 30 public release.。

On the one hand, the introduction of Shi-bor has accelerated the process of interest rate marketization in China; on the other hand, it has created conditions for the central bank's financial regulation to shift from quantity-based to price-based, i.e., the current monetary policy framework with money supply as an intermediary target has been transformed into a framework with inflation or interest rates as an intermediary target.。Peng Xingyun, director of the Monetary Policy Office of the Institute of Finance of the Chinese Academy of Social Sciences, said。

At the same time, Shibor will be an extremely important variable for the central bank's monetary policy regulation in a market economy, which can play a leading and central role in the overall interest rate system and constrain other interest rates.。The central bank can later adjust the benchmark interest rate through open market operations to form reasonable market expectations, which in turn can transmit and influence microeconomic behavior to make its regulation more precise and effective.。

II. Impact

(1) The introduction of the RMB benchmark interest rate creates conditions for monetary policy to shift to price-based。

From the current point of view, the central bank's monetary policy objectives include four aspects, namely, inflation, economic growth, employment and international payment balance.。The objective environment makes it difficult for the central bank to pursue a single monetary policy goal, so central bank governor Zhou Xiaochuan also said that it is difficult to shift monetary policy from quantitative to price-based regulation at present.。

However, it has been proven that price-based regulation is more effective than quantity-based regulation。Peng Xingyun, director of the Monetary Policy Office of the Institute of Finance of the Chinese Academy of Social Sciences, said the launch of Shibor will create conditions for the central bank's financial regulation to shift from quantity-based to price-based regulation, that is, the current monetary policy framework with money supply as an intermediary target to a framework with inflation or interest rates as an intermediary target.。

In other words, the central bank can influence the level of Shibor to achieve the purpose of regulation.。Shibor, which is the benchmark market interest rate, can help to achieve rational pricing of capital and thus improve the efficiency of capital utilization, as well as establish a new macroeconomic policy system.。

Huang Yiping, chief economist for Asia Pacific at Citigroup, added that without market-based interest rates, it would be difficult to discuss market-determined exchange rates。Interest rate reform is also an important part of capital market development, macroeconomic policy reform, and even capital account opening.。

In addition, market participants also pointed out that with the Shibor-based market interest rate system framework, the central bank can also take greater steps in foreign exchange reserve management, exchange rate formation mechanism.。

(2) Increased pressure on banks that rely on eating spreads

With the launch of Shibor and the further development of interest rate marketization, banks that used to rely on eating spreads will feel more headaches, while also pushing banks to take the initiative to carry out more financial innovation.。Guotai Junan analyst Wu Yonggang said that after the formation of the benchmark interest rate, the floating space of loan deposit rates is expected to be further liberalized, in the short term, it is likely to experience the stage of net interest margin contraction, which is currently mainly dependent on interest income of commercial banks will bring greater pressure。Banks with better retail and intermediate business will be less negatively affected.。

He also said that the formation of the benchmark interest rate will help financial institutions to improve product development and pricing capacity, but also for the commitment to product innovation and strong financial institutions to provide opportunities.。New product development and pricing are the advantages of foreign banks, "at a time when the banking industry is fully open to the outside world, cultivating benchmark interest rates is conducive to accelerating the process of interest rate marketization in China and enhancing the comprehensive competitiveness of financial services."。"

Shibor explains:

Shibor is the arithmetic average interest rate determined by the calculation of the RMB interbank offered rate independently quoted by a quotation group of banks with higher credit ratings, which is a simple interest, unsecured, wholesale interest rate.。Shibor varieties currently available to the public include overnight, 1 week, 2 weeks, 1 month, 3 months, 6 months, 9 months and 1 year.。The formation of Shibor is like this: each trading day, the National Interbank Lending Center according to the quotations of each quoting bank, excluding the highest and lowest two quotations, the remaining quotations for the arithmetic average calculation, to arrive at each term varieties of Shibor, and 11: 30 public release.。

(3) Impact on bank shares.

After the formation of the benchmark interest rate, the floating space of loan deposit interest rates is expected to be further liberalized, in the short term, it is likely to experience a stage of net interest margin contraction, which will bring greater pressure on commercial banks, which are currently mainly dependent on interest income.。Banks with better retail and intermediate business will be less negatively affected.。

With the introduction of the benchmark interest rate, bank stocks with strong retail business, such as China Merchants Bank, will benefit more and their share prices may benefit from it, while most other bank stocks that rely on eating interest spreads may be depressed in the short term.。

III. Status Quo

In 2007, the central bank adjusted the benchmark interest rate six times.

The benchmark interest rate is one of the important means for the Central Bank of China to achieve its monetary policy objectives, and the benchmark interest rate can only be set on the basis of monetary policy objectives.。When the focus of policy objectives changes, interest rates as a policy tool should also change.。Different interest rate levels reflect different policy requirements, and when the policy focus is on stabilizing the currency, central bank lending rates should be raised at the right time to curb overheated demand;。For example, in 1987, in response to the rising temperature of the economic air, the State Council proposed to "compress the economic air," and extensively carried out a campaign to increase production and save money, increase revenue and reduce expenditure.。The Central Bank has clearly put forward a "tight and live" monetary policy, raising the central bank lending rate, from the fourth quarter onwards, the annual loan and short-term loan interest rates from 3..4 ‰ and 5.4 ‰ to 6 ‰。In the fourth quarter of 1988, in the face of overheating and obvious inflation, the Party Central Committee and the State Council put forward the policy of "governing the economic environment and rectifying economic order," and a series of policies and measures aimed at tightening monetary policy were introduced one after another, including continuing to raise the central bank lending rate, the annual lending rate and the short-term lending rate, from 6 ‰ to 6 ‰, respectively..9 ‰ and 6.3 ‰ to control the excessive demand for credit funds。

One year to 2007: benchmark deposit rate of 4.14%, with a lending base rate of 7.47%

IV. Benchmark interest rate as of May 2008

The latest benchmark lending rate for 2008

Project Annual Interest Rate%

I. Short-term loans

6 months (inclusive) 5.67 Six months to one year (inclusive) 6.39

Second, medium and long-term loans.

One to three years (inclusive) 6.57 Three to five years (inclusive) 6.75 more than five years 7.11

III. Discount

On the basis of the rediscount rate, no more than the loan rate (including floating) plus points for the same period.

The latest bank benchmark interest rate in 2008

Project annual interest rate% I, urban and rural residents and unit deposit demand 0..72 Periodically

1. Entire deposit and rounding

Three months 1.98 Half Year 2.43 a year 2.79 2 years 3.33 Three years 3.96 five years 4.41

2, zero deposit, whole deposit zero, deposit interest.

One year 1.98 years 2.43 5 years 2.79

3, fixed and live two will be within one year of regular deposit and withdrawal of the same grade interest rate of 60%.

II. Agreement Deposits 1.44

Third, notice deposit one day 1..08 7 days 1.62