金融英语考试模拟试题及答案(04)
Question6：
Answer:
Under the traditional planned economic system, there were only such concepts as credit management, cash management and so on. As a comprehensive concept monetary policy came into being in China in the process of economic reform and establishment of the market economy when the experience of money and credit management in western countries was used for reference.
China’s monetary policy, in general sense, is the same as the concept of monetary policy in western economics, including such factors as operating instruments, operating targets, intermediate targets and final targets. The impact of monetary policy on China’s macro-economy is produced through the transmission of those factors one by one.
(1) The final targets of China’s monetary policy
The present final target of China’s monetary policy is “to maintain a steady currency and promote economic growth". Price stability is the precondition and basis of normal operation of economy. If too much money is issued and inflation occurs, it is hard to control market prices, stabilize people’s living standard and maintain steady economic growth. Economic development in turn provides material base for stabilizing currency. Only by supporting the reasonable demand for productive funds and increasing supply of commodities needed in the market can there be a reliable material base for steady currency.
(2) The operating and intermediate targets of China’s monetary policy
Before 1984 when the PBC functioned as a central bank, the operating and intermediate targets of monetary policy were credit quota and the amount of cash issue. After 1984, the central bank lending to financial institutions was included in "operating targets" and has become important ever since. In 1993, the Decision on Financial Reform issued by the State Council stipulated that intermediate and operating targets are “money supply, the total credit, and the inter-bank offered rate and bank reserve rate". In 1995, the PBC started its attempt to take M, and M2 as the intermediate target. In 1996, the PBC regularly adopted M and M2 in the intermediate targets of its monetary policy.
(3) The monetary policy instruments
Up to now, credit plan and cash plan have been the basic monetary policy instruments in China. But officially set deposit and lending interest rates, basic interest rate, required reserve ratio, bank reserve rate, the central bank lending rate, discount rate, special deposits and open market operations have become monetary policy instruments one after another and played a more and more important role. The Law of the People’s Republic of China on the People’s Bank of China passed in March 1995 stipulates that monetary policy instruments are reserve requirement, basic interest rate, the central bank lending rate, discount rate, open market operations and other monetary policy instruments set by the State Council. So the system of monetary policy instruments that conform to the socialist market economy has been lawfully set up.
With the establishment of socialist market economy the gradual shift from direct to indirect monetary policy instruments has greatly improved transmission mechanism of monetary policy and effectiveness of macroeconomic management in China. But in a transition period the potency of monetary policy is still subject to various factors as follows：
●Government’s intervention. In economic activities, intervention by governments at each level is still strong. It is not rarely seen that local governments often force banks to make loans for the sake of development of local economy, which interferes the independence of the central bank’s monetary policy and blurs monetary policy targets, so monetary policy instruments are partly ineffective.
●Less developed markets. In the transition period market mechanism is not perfect while the planned mechanism has lost much of its share. So the vacuum in management of national economy appears. As a result distribution of resources is in disorder and the contradiction in economic structure is obvious. The central government has to increase investment in order to better economic structure, so it’s hard to contract investment size, wipe out investment expansion of fixed assets and control the money supply. So implementation of monetary policy of the central bank is interfered with.
●Imperfect self-constraint mechanism of financial institutions. As China’s financial institutions are still under reform, their behavior is not standardized because of imperfect self-constraint mechanism. So the impact of the central bank’s monetary policy on reserves of financial institutions is not sure and the operating targets can not respond sensitively.
●Lack of self-constraint mechanism of enterprises. In order to maintain certain increasing rate of production enterprises in China have a strong demand for funds from outside as they usually have low level of accumulation. At present the supply of funds from outside enterprises mainly comes from commercial bank. It places great pressure on the credit control by commercial banks and the central bank and is harmful to the central bank’s control on the money supply.
●Less developed financial markets with fewer types and amount of financial assets. As there is fewer types and amount of financial assets it’s difficult for the open market operation to play its role in regulating macro-economy. To sum up, the central bank’s experience in managing macro economy has been richer and its ability to adapt to new environment has become stronger with the deepening of China’s economic and financial reform. Though there are short points existing in both micro-entities and the central bank, it-is true to the fact that the operation of monetary policy in China is becoming more and more experienced.
Answer:
Under the traditional planned economic system, there were only such concepts as credit management, cash management and so on. As a comprehensive concept monetary policy came into being in China in the process of economic reform and establishment of the market economy when the experience of money and credit management in western countries was used for reference.
China’s monetary policy, in general sense, is the same as the concept of monetary policy in western economics, including such factors as operating instruments, operating targets, intermediate targets and final targets. The impact of monetary policy on China’s macro-economy is produced through the transmission of those factors one by one.
(1) The final targets of China’s monetary policy
The present final target of China’s monetary policy is “to maintain a steady currency and promote economic growth". Price stability is the precondition and basis of normal operation of economy. If too much money is issued and inflation occurs, it is hard to control market prices, stabilize people’s living standard and maintain steady economic growth. Economic development in turn provides material base for stabilizing currency. Only by supporting the reasonable demand for productive funds and increasing supply of commodities needed in the market can there be a reliable material base for steady currency.
(2) The operating and intermediate targets of China’s monetary policy
Before 1984 when the PBC functioned as a central bank, the operating and intermediate targets of monetary policy were credit quota and the amount of cash issue. After 1984, the central bank lending to financial institutions was included in "operating targets" and has become important ever since. In 1993, the Decision on Financial Reform issued by the State Council stipulated that intermediate and operating targets are “money supply, the total credit, and the inter-bank offered rate and bank reserve rate". In 1995, the PBC started its attempt to take M, and M2 as the intermediate target. In 1996, the PBC regularly adopted M and M2 in the intermediate targets of its monetary policy.
(3) The monetary policy instruments
Up to now, credit plan and cash plan have been the basic monetary policy instruments in China. But officially set deposit and lending interest rates, basic interest rate, required reserve ratio, bank reserve rate, the central bank lending rate, discount rate, special deposits and open market operations have become monetary policy instruments one after another and played a more and more important role. The Law of the People’s Republic of China on the People’s Bank of China passed in March 1995 stipulates that monetary policy instruments are reserve requirement, basic interest rate, the central bank lending rate, discount rate, open market operations and other monetary policy instruments set by the State Council. So the system of monetary policy instruments that conform to the socialist market economy has been lawfully set up.
With the establishment of socialist market economy the gradual shift from direct to indirect monetary policy instruments has greatly improved transmission mechanism of monetary policy and effectiveness of macroeconomic management in China. But in a transition period the potency of monetary policy is still subject to various factors as follows：
●Government’s intervention. In economic activities, intervention by governments at each level is still strong. It is not rarely seen that local governments often force banks to make loans for the sake of development of local economy, which interferes the independence of the central bank’s monetary policy and blurs monetary policy targets, so monetary policy instruments are partly ineffective.
●Less developed markets. In the transition period market mechanism is not perfect while the planned mechanism has lost much of its share. So the vacuum in management of national economy appears. As a result distribution of resources is in disorder and the contradiction in economic structure is obvious. The central government has to increase investment in order to better economic structure, so it’s hard to contract investment size, wipe out investment expansion of fixed assets and control the money supply. So implementation of monetary policy of the central bank is interfered with.
●Imperfect self-constraint mechanism of financial institutions. As China’s financial institutions are still under reform, their behavior is not standardized because of imperfect self-constraint mechanism. So the impact of the central bank’s monetary policy on reserves of financial institutions is not sure and the operating targets can not respond sensitively.
●Lack of self-constraint mechanism of enterprises. In order to maintain certain increasing rate of production enterprises in China have a strong demand for funds from outside as they usually have low level of accumulation. At present the supply of funds from outside enterprises mainly comes from commercial bank. It places great pressure on the credit control by commercial banks and the central bank and is harmful to the central bank’s control on the money supply.
●Less developed financial markets with fewer types and amount of financial assets. As there is fewer types and amount of financial assets it’s difficult for the open market operation to play its role in regulating macro-economy. To sum up, the central bank’s experience in managing macro economy has been richer and its ability to adapt to new environment has become stronger with the deepening of China’s economic and financial reform. Though there are short points existing in both micro-entities and the central bank, it-is true to the fact that the operation of monetary policy in China is becoming more and more experienced.