In the past two years, various financial problems caused by excess liquidity in my country's banks have become more serious, affecting the effectiveness of the central bank's monetary policy. This article starts from the appearance of excess liquidity in commercial banks, analyzes the causes of excess liquidity, and elaborates on excess liquidity and monetary policy from two aspects: the impact of monetary policy tools on excess liquidity and the impact of bank liquidity on the monetary policy transmission mechanism. relationship between effectiveness. Finally, some countermeasures are proposed to alleviate excess liquidity and improve the effectiveness of monetary policy.

Keywords: excess liquidity; monetary policy; effectiveness

Before the late 1990s, my country's commercial banks had long-term liquidity shortages and credit expansion was quite obvious. Since the beginning of the 21st century, liquidity in the banking system has continued to be loose. Especially since 2005, the problem of excess bank liquidity has become increasingly prominent. The "liquidity trap" that economists believe has a very low probability of occurrence has begun to take shape in my country's financial operations, and has had an impact on the sound operation of the financial system that cannot be ignored. [1] In 2006, the huge liquidity of banks caused the nationwide credit scale to expand sharply, which indirectly promoted the overall rise in various asset prices and posed a severe challenge to the effectiveness of the central bank's monetary policy. How to effectively solve the problem of excess bank liquidity, unblock the monetary policy transmission mechanism, and thereby improve the effectiveness of monetary policy are major issues facing the central bank.

1? Manifestations of excess bank liquidity

(1) The deposit gap continues to expand

Since the country implemented the latest round of macro-control in 2004, financial The growth rate of institutions' loan balances has gradually been lower than the growth rate of deposit balances, and the gap between the two has continued to widen, with the loan-to-deposit ratio declining significantly. As of the end of 2005, the growth rate of deposits was 3.17 percentage points higher than the growth rate of loans, which was 3.8 times that of 2000; the deposit gap of financial institutions reached 9.2 trillion yuan, accounting for 32% of the deposit balance; the existing loan-to-deposit ratio was 68.0%, the new The incremental loan-to-deposit ratio was 53.6%. In 2005, for every 100 yuan of deposits taken in by commercial banks, only about 53 yuan was converted into loans and entered the real economy, while nearly half of the funds remained in the financial system for internal circulation.

(2) Excess reserves remain high

The excess reserves of financial institutions at the central bank increased from 400 billion yuan at the end of 2000 to 1.265 trillion yuan at the end of 2004. The average growth rate is as high as 32.9%. Although the central bank lowered the excess reserve ratio by 0.63 percentage points on March 17, 2005, the excess reserves deposited by financial institutions with the central bank continued to rise rather than fall, reaching 1.26 trillion yuan by the end of September. As of the end of December 2005, the excess reserve ratio of all financial institutions reached 4.17%. Excessive reserves not only increase the payment costs of the central bank, but also face pressure that greatly reduces the transmission effect of monetary policy. As of the end of July 2006, the excess deposit reserve ratio of financial institutions reached 2.7%.

(3) The growth rate gap between M2 and M1 continues to widen

In 2005, the growth rate of M2 exceeded the expected growth rate of 15% for several consecutive months. The growth rate gap between M2 and M1 It expanded from 3.3% at the beginning of the year to 5.8% at the end of the year. At the end of December 2005, the M2 balance was 29.9 trillion yuan, a year-on-year increase of 17.6%, and the growth rate was 2.94 percentage points higher than the previous year; the M1 balance was 1,017 trillion yuan, a year-on-year increase of 11.78%, and the growth rate was 1.8 percentage points lower than the previous year. . After entering 2006, the gap between the growth rates of M1 and M2 became even greater. In the first quarter, the year-on-year growth of M2 hit a new high of 8.58 percentage points higher than the year-on-year growth of M1.

(4) Money market interest rates continue to fall

Since March 2005, the entire money market interest rates have continued to fall. Among them, the interbank lending rate in the inter-bank market dropped from the highest level of 2.18% to the lowest level of about 1.11%; at the end of the year, the weighted average interest rate of the 7-day pledged treasury bond repurchase was only 1.56%, a decrease of 28% from 1.84% at the beginning of the year. Basis point, affected by this, the money market yield curve showed a downward trend. The current yields on one-year treasury bonds and central bank bills in the interbank market are hovering around 1.32% and 1.42%, and the issuance interest rate on two-year financial bonds has also fallen below 2.0%, both lower than the one-year bank deposit interest rate of 2.25%. , money market interest rates and bank deposit interest rates have become inverted. In the first quarter of 2006, the central bank bill interest rate, inter-bank repurchase rate and inter-bank lending rate increased by about 70 basis points compared with the end of last year. Among them, the spread between one-year central bank bills and deposits has shrunk to 38 basis points, and the spread between the more market-oriented inter-bank 7-day repurchase rate and deposit rates has shrunk to 19 basis points, but it still has not changed the relationship between currency market interest rates and deposit rates. The phenomenon of bank deposit interest rate inversion.

II? The main reasons for excess liquidity in my country’s banks

(1) Imbalance in economic structure and regional development

Economy determines finance, the root cause of current excess liquidity It is the imbalance of my country's economic structure and regional development. Relative to the rapid growth of investment and exports, the growth rate of consumption has lagged far behind them in recent years. At the end of the 20th century, my country began to implement active fiscal policies, and investment growth has always been the main driving force for economic growth.

In the rising period of the new economic growth cycle since 2003, the gap between investment and consumption has not narrowed, but has further widened. From 2002 to 2005, the growth rates of fixed asset investment in my country were 16.1%, 26.2%, 27.6% and 25.7% respectively, while the growth rates of total retail sales of consumer goods during the same period were 8.8%, 9.1%, 13.3% and 12.9% respectively. ; In the first half of 2006, the former grew by 29.8%, while the latter only grew by 13.3%. The problem of imbalance in the ratio of investment and consumption has intensified. Relatively backward consumption has caused a large amount of funds to circulate within the banking system.

At the same time, there is also the problem of structural imbalance in investment. On the one hand, there is excess funds in large enterprises, on the other hand, there is an extreme shortage of working capital of small and medium-sized enterprises; on the one hand, there is overcapacity caused by repeated investment in some popular industries, and on the other hand, there is serious underinvestment in sectors such as medical care and education. From a regional perspective, the economically developed regions represented by the Yangtze River Delta, the Pearl River Delta and Beijing, Tianjin and Tangshan have prominent liquidity problems, while the vast central and western regions are still facing a situation of insufficient funds; cities are under the pressure of excess liquidity, while rural areas still have insufficient funds. lack. The increasingly active “underground finance” strongly proves that my country is not an overall country with excess liquidity (Ba Shusong, 2006). [2] A few high-profit industries that are chased by capital have "hoarded" a large amount of funds, and their asset prices have been constantly revalued, which has driven the prices of related resources to rise, creating the illusion of overall "excess" bank liquidity.

(2) Rapid growth of foreign exchange reserves

One of the main reasons for excess liquidity in banks is the growth in foreign exchange holdings driven by the rapid growth of foreign exchange reserves. In 2005, the base currency released based on foreign exchange accounts for approximately 90% of the total base currency, and the total amount of bills issued by the central bank for hedging operations reached 2.77 trillion yuan. Therefore, the trend of increasing currency liquidity in order to "hedge" the pressure of RMB appreciation and stabilize the exchange rate is still strong. Relevant data show that in the first quarter of 2006, the overall currency liquidity reached 2.0 trillion yuan, a year-on-year increase of 93.4%; the foreign exchange reserves reached 0.88 trillion US dollars, a year-on-year increase of 32.76%; the foreign exchange balance was 7.7 trillion yuan, a year-on-year increase of 34.96% ; During the same period, bank loan balances and securities investments were 20.6 trillion yuan and 3.6 trillion yuan respectively, a year-on-year increase of 11.29% and 17.23% respectively.

(3) The effective demand for loans is relatively insufficient

In 2005, the loan growth rate of national financial institutions was 13.53%, which was lower than the 14.54% in 2004. The new loans of banking institutions dropped from 3 trillion yuan in 2003 to 2.5 trillion yuan in 2005; the growth rate of medium and long-term loans continued to decline, from 30% in 2003 to 16.2% in 2005. Although bank loans once experienced rapid growth in the first quarter of 2006, which led the central bank to introduce relevant macro-control measures to curb the possible trend of excessive loan issuance, the situation of relatively insufficient effective demand for loans in the whole society has not been fundamentally changed. . The relative lack of effective demand for loans is mainly due to the decline in overall profitability of industrial enterprises across the country, which has led to the shrinking of credit. In 2005, state-owned and state-holding enterprises realized profits of 644.7 billion yuan, an increase of 17.4% over the previous year, which was far lower than the 42.5% year-on-year increase in the same period last year; joint-stock enterprises realized profits of 742 billion yuan, an increase of 28.7%, which was lower than the previous year's growth. level of 39.4%. In the first quarter of 2006, among the 66 industries surveyed by the National Bureau of Statistics, as many as 24 had reduced profits or increased losses, 9 more than the previous quarter. The decline in corporate efficiency and the expansion of losses will directly reduce the demand for credit from banks.

(4) The savings of urban and rural residents continue to grow

At the end of 2005, the balance of my country's residents' savings was 14.11 trillion yuan, the GDP of that year was 18.23 trillion yuan, and the savings rate was as high as 77.36%. In the first quarter of 2006, the balance of national residents' savings deposits continued to maintain rapid growth. Compared with my country's high savings rate, the global average savings rate was only 19.7% in 2001. The savings rate in rich countries is usually higher than that in poor countries, but it is only around 20%. The high household savings rate in our country at this stage is related to many factors such as our country's cultural traditions, social structure, and family concepts. One of the main reasons for the high household savings rate is that the current social security system reform has not been completed, and a complete pension insurance, unemployment and medical insurance system has not been formed. People have accumulated a large amount of preventive savings for pension, medical and other reasons. At the same time, the uncertainty of future income makes residents more inclined to increase savings and reduce consumption. In addition, the reform of the housing system and education system has also caused a considerable amount of public savings to be used for buying houses and saving for children's education, which is also one of the reasons for the high savings rate.

[3]

3? The impact of excess bank liquidity in my country on the effectiveness of monetary policy

(1) Definition of the connotation of effectiveness of monetary policy

Although different When scholars study the effectiveness of monetary policy, due to different emphasis, there are varying degrees of definition of the effectiveness of monetary policy. However, fundamentally speaking, the effectiveness of monetary policy includes at least two meanings: first, monetary policy. Can the policy have an impact on real economic variables such as output and employment, and to what extent? Second, whether the monetary authorities have the ability to guide the economy through the use of monetary policy to achieve established macroeconomic goals. The first level of meaning refers to the issue of the effect of monetary policy on the actual economic operation, that is, whether and to what extent monetary policy can affect real economic variables such as output and employment. This can be summarized as the theoretical effectiveness of monetary policy. Sexual issues are the basis for the effectiveness of monetary policy. If monetary policy can indeed have an important impact on real variables in the economy (output and employment), then monetary policy is theoretically effective, and the theory called monetary policy is effective; if monetary policy cannot have an important impact on the actual economic operations at all If the variables have an impact, or the impact is insignificant, then the effectiveness of monetary policy cannot be discussed, and monetary policy is ineffective. The second level of meaning is based on the first level of meaning, that is, if monetary policy does have a strong impact on actual economic variables such as output and employment (monetary policy is theoretically effective), then the monetary policy authorities will Within the scope of knowledge, is it possible to use the influence of monetary policy to guide economic operations to achieve established macroeconomic goals? This can be summarized as the issue of the effectiveness of the implementation of monetary policy. If both theory and empirical evidence show that monetary policy has an important impact on real economic variables, and the monetary authorities can use the effectiveness of monetary policy to achieve established macroeconomic goals, then monetary policy is implemented effectively; conversely, if monetary policy has theoretical However, the monetary authorities are simply unable to use the effectiveness of monetary policy to guide the economy to operate on the expected track. The implementation of monetary policy is ineffective, and the effectiveness of monetary policy is just an empty talk with no practical significance. [4]

From the above definition of the connotation of the effectiveness of monetary policy, the impact of excess bank liquidity on the effectiveness of monetary policy studied in this article belongs to the effectiveness of the implementation of monetary policy, including monetary policy tools. The impact of excess liquidity and the impact of bank liquidity on the monetary policy transmission mechanism.

(2) The dilemma of my country’s monetary policy tools in solving the problem of excess liquidity

1. Raising the deposit reserve ratio reduces bank liquidity. Since 2006, the central bank has raised the deposit reserve ratio twice from 7.5% in 2004 to 8.5%, and the foreign exchange deposit reserve ratio from 3% to 4%. In about a month, the central bank raised the statutory deposit reserve ratio twice, which can directly freeze about 300 billion yuan of funds. Coupled with the impact of the multiplier effect, the actual tight liquidity may reach 1.2 trillion yuan. about. In an environment where the financial system is sound, raising the statutory deposit reserve ratio can effectively shrink overall liquidity. However, judging from the current arrangements of China's financial system and the reasons for bank liquidity, the role of raising the deposit reserve ratio is not very obvious. This is mainly because: First, the foreign exchange reserves caused by the compulsory foreign exchange settlement and sales system have become an important channel for the central bank to release base currency. At present, the injection of my country's base currency is not entirely based on the needs of economic development, but is mainly used to balance the international balance of payments. The central bank raised the deposit reserve ratio by 1 percentage point within a month, but commercial bank credit still maintained high growth. One of the important reasons is that the central bank lacks effective measures to sterilize the base currency injected through foreign exchange reserves. Secondly, raising the deposit reserve ratio will have little impact on the liquidity of wholly state-owned commercial banks, and it will be difficult to constrain their lending behavior. State-owned commercial banks themselves have sufficient liquidity and have strong ability to absorb liquidity. At the same time, state-owned commercial banks are the main holders of government bonds, policy financial bonds, and central bank bills. They can meet liquidity needs in a timely manner through sales or repurchases, and can obtain re-loans from the central bank even when liquidity difficulties arise. Since wholly state-owned commercial banks have an absolute advantage in my country's financial system, their profit-seeking motives will greatly reduce the effectiveness of the central bank's credit tightening. [5]

2. Interest rate adjustments have little effect on excess liquidity. In April 2006, the central bank raised the benchmark loan interest rate for financial institutions, and the one-year benchmark loan interest rate for financial institutions increased by 0.27 percentage points to 5.85%. In a mature financial market, interest rates, as a powerful price-based control method, can effectively guide the contraction and expansion of funds in the financial market. As long as the central bank takes small steps and continuous interest rate increases, the effect of interest rate increases will slowly be revealed. . However, since the relationship between various interest rates in my country has not been straightened out, the role of benchmark interest rates as a policy tool is still very limited. The central bank's method of determining loan interest rates for financial institutions cannot yet meet the needs of pre-adjustment and fine-tuning of monetary policy, and cannot give full play to the comprehensive effect of coordination of monetary policy tools. Judging from the actual effects of previous interest rate changes, corporate loans and residents' savings deposits are not sensitive to interest rate changes, and the effect of interest rate policies is small.

3. Open market operations have limited ability to “hedge” liquidity.

Open market operations are a policy means by which the central bank adjusts the base currency by buying and selling securities in the money market, thereby adjusting the money supply or interest rates. In recent years, open market operations have gradually become the most frequent and most relied upon policy tool for macroeconomic control by the People's Bank of China, playing an important role in controlling the total money supply and guiding market interest rates. At the beginning of the central bank's open market operations, the main target was the government bond market, but the number of short-term government bonds was very small, and only about 30% of the issued government bonds could be listed and circulated, and the variety and term structure could not meet the needs of monetary policy operations. , thereby limiting the central bank's ability to use government bonds for open market operations. Starting in 2002, the central bank tried to use central bank bills, which effectively hedged against the pressure of a large increase in foreign exchange reserves. However, the limited nature of central bank bills as an interest rate (price) adjustment tool puts the central bank in a weak position when talking to the market (Li Yang, 2004). [6]

Another situation worthy of attention is that the effect of domestic currency open market operations on base money supply is often diverted by the impact of foreign currency open market operations. Since my country implements a de facto fixed exchange rate system, as the U.S. economy has weakened in recent years, the trade deficit and current account deficit have risen to record highs, the U.S. dollar has continued to depreciate sharply, and international investors have sold U.S. dollars in large quantities. In order to maintain a relatively fixed exchange rate system, the central bank can only invest more base currency to purchase US dollars. Therefore, regarding the direction of monetary policy, the central bank is faced with the dilemma of preventing excessive money supply while maintaining a relatively fixed exchange rate. Due to the rigidity of the fixed exchange rate system, it eventually led to the continuous expansion of central bank bills, thereby reducing the ability of central bank bills to "hedge" liquidity.

(3) The impact of my country’s bank excess liquidity on the monetary policy transmission mechanism

1. Current status of my country’s monetary policy transmission mechanism. Before the reform and opening up, the transmission channel of my country's monetary policy was: People's Bank of China → People's Bank of China branches → Enterprises. The transmission process is simple, directly from policy means to the ultimate goal. In the 1980s after the reform and opening up, with the establishment of the central bank system and the improvement of the financial organization system, monetary policy formed a transmission system of "central bank → financial institutions → enterprises", and the money market has not yet fully entered the transmission process. After entering the 1990s, financial macro-control methods were gradually transformed, and a transmission system of "central bank → money market → financial institutions → enterprises" was initially formed, and an indirect transmission mechanism of "policy tools → operational targets → intermediary targets → final targets" was initially established. . Since the mid-1990s, indirect regulation has continued to expand. The ultimate goal of monetary policy is determined to stabilize currency and promote economic development; the intermediary and operational goals of monetary policy have shifted from loan scale to money supply and base money; deposit reserves? interest rates? central bank loans? rediscount? open market operations and other indirect control measures are gradually expanded. At present, an indirect control system has been basically established with stable currency as the ultimate goal, money supply as the intermediary goal, and using a variety of monetary policy tools to regulate the base currency (operational goal).

2. The impact of excess bank liquidity on the operational objectives of monetary policy. The overall liquidity in my country's financial market is relatively high, with M2/GDP close to 2 times, which is rare in the world, both in developed and developing countries. The contradiction between excessive overall liquidity and deflation does not become apparent. When encountering inflationary expansion, the excess liquidity accumulated over many years will put tremendous pressure on the central bank's macroeconomic control. When the central bank's regulatory intention requires loosening money, the "loose" money may not flow to the industries and enterprises that the central bank intends to control. When the central bank's regulatory intention requires tightening currency, it may not be able to flow from the central bank's regulatory intention to the industries and enterprises. industries and businesses to withdraw currency. The continued large excess of liquidity will inevitably have a negative impact on the achievement of the operational objectives of monetary policy. Since the current main source of excess bank liquidity is the massive increase in foreign exchange outstanding, the impact of excess bank liquidity on the operational objectives of monetary policy is the impact of foreign exchange outstanding on the operational objectives of monetary policy, that is, the impact of foreign exchange outstanding on the base money supply. Quantity influence. [7]

From the perspective of the goal of exchange rate policy, exchange rate stability is the goal of currency value stability. However, under the current exchange rate management system, in order to stabilize the RMB exchange rate, the central bank can only passively absorb foreign exchange and purchase foreign exchange. The greater the volume, the greater the money supply. As a result of the operation of the foreign exchange sterilization policy, the proportion of foreign exchange accounts for funds has increased rapidly, while the proportion of money injection methods such as re-lending has continued to decline. Due to the continuous increase in foreign exchange holdings, in order to control the supply of base money within an appropriate range, the central bank is forced to continue to issue central bank bills and correspondingly withdraw or reduce credit loans such as re-lending, thereby achieving the purpose of controlling the total supply of base money. . [8] Due to the uneven distribution of foreign exchange resources, the distribution ratio of currency investment between export-oriented enterprises and inward-oriented enterprises is seriously imbalanced. This has caused the central bank’s autonomy to use credit tilt to support a certain industry or industry. Extremely restrictive. Export-oriented enterprises have relatively abundant funds, while domestic enterprises are facing an intensification of tight liquidity. Likewise, there is an imbalance in the regional distribution of money supply. Developed coastal areas with a high degree of openness to the outside world will have a relatively sufficient supply of funds, while inland areas with a low degree of openness to the outside world will have a relative shortage of funds. This imbalance in the structure of capital flows will intensify as the proportion of foreign exchange accounts for funds increases.

Four? Countermeasures and suggestions to solve the excess liquidity of my country's banks

(1) Take multiple measures to reduce the liquidity of the banking system

1. Vigorously develop the capital market , weakening enterprises’ dependence on bank credit. Formulate loose policies to encourage all types of funds to enter the capital market; establish a new market access mechanism to provide domestic listing and financing channels for outstanding enterprises, especially small and medium-sized enterprises with high technological content. The healthy development of the capital market can provide good guarantee for the good operation of the economy. Enterprises will get more financing channels and residents will get more investment opportunities, thus reducing the deposit gap of banks.

2. Promote the diversification of bank asset structures through institutional innovation. First, establish a universal bank to allow banks to increase returns and spread risks through diversified investments. For example, banks can increase investment channels through stock investment and other methods. Although the proportion of bank loans in my country's total assets has dropped to 65%, for large foreign banks, loans are generally around 40%. Secondly, increase the types of loans for individuals and small and medium-sized enterprises, and increase the bank's high-quality assets. Thirdly, by accelerating the pace of bank asset securitization, banks can realize medium and long-term assets into funds, encourage residents to purchase bank bonds, promote the mutual conversion of investment and savings, change the current single situation of bank assets, and increase bank profitability.

3. Improve social security and medical security systems, and update residents’ consumption concepts. Establish and improve social security and medical security systems to provide good services to all citizens and create a good environment for residents' expected consumption. For residents, it is necessary to further update their consumption concepts and make good use of personal consumption loans such as housing provided by banks to increase consumption and improve their living standards.

(2) Reduce foreign exchange holdings, strengthen market functions, and improve the effectiveness of monetary policy

1. Further deepen the reform of the foreign exchange management system, divert foreign exchange reserves, and ease the pressure of foreign exchange holdings , curbing the continued growth of liquidity from the source. Reform the current foreign exchange settlement and sales system, gradually transition from compulsory foreign exchange settlement and sales to voluntary foreign exchange settlement and sales, relax the proportion of foreign exchange retained by all export-collecting enterprises, change the foreign exchange bank settlement turnover limit management to proportional management, and gradually increase the foreign exchange held by various market entities. proportion. Reduce the base currency injected by the central bank through foreign exchange reserves. The foreign exchange account policy should be adjusted in the direction of diverting foreign exchange from the market, promote the facilitation of trade and investment, support enterprises to go global, and change the long-standing problem in my country's foreign exchange management field that it is easy for foreign capital to flow in and difficult to flow out; it is strict for enterprises and easy for individuals. ; An asymmetric management structure that is strict on domestic investment but loose on foreign investment, gradually widens capital outflow channels, allows and expands international development institutions or enterprises to issue RMB bonds or raise funds in other RMB financing forms within the country, and reduce the pressure for RMB appreciation. Adhere to the principles of initiative, controllability and gradualness, and based on the needs of my country's own reform and development, on the premise of ensuring financial market and economic stability, further expand the floating range of the RMB exchange rate, and reasonably determine the RMB exchange rate target zone. The establishment of the RMB exchange rate target zone sends a clear signal to the market, enhances the public's psychological expectations for the exchange rate, enables market trading entities to respond freely according to market signals, and timely alleviates and releases the impact of various adverse factors in the foreign exchange market, so that The implementation of the central bank's monetary policy should be as free from external factors as possible to increase the room for maneuver in monetary policy regulation. [9]

2. Further improve the market infrastructure, consolidate the market foundation, and expand the space for central bank monetary control. Through the market mechanism, commercial banks can independently decide the trading behavior of the foreign exchange market, making my country's foreign exchange market a diversified and decentralized market based on the market maker system. It is necessary to expand the trading entities in the foreign exchange market and change the homogeneity of the current trading entities in China's foreign exchange market. Relax market access restrictions and increase market transaction entities. Non-bank financial institutions? Large enterprise groups, etc. can gradually directly enter the inter-bank market to participate in transactions. Vigorously carry out product innovation, launch and expand inter-bank forward foreign exchange transactions as soon as possible, and gradually launch derivatives transactions such as swaps, futures, swaps and repurchases, so that the market can meet the needs of participants in providing hedging, risk avoidance and investment and financial management. and a series of financial services needs.

3. Further improve the offsetting strategies and methods for foreign exchange holdings and improve the efficiency of foreign exchange offsetting. The first is to establish a foreign exchange stabilization fund. According to international practice, part of the exchange fund should come from the country's foreign exchange reserves, and the other part should mainly come from the foreign exchange assets of commercial banks. Through the important adjustment lever of the foreign exchange stabilization fund, a buffer barrier is set up between the central bank and the foreign exchange market to cut off the direct connection between foreign exchange reserves and changes in domestic currency volume. The second is to flexibly design and select various offsetting tools and expand the number in the combination basket. There are many successful foreign experiences in this regard that are worth learning from. For example, "currency stabilization bonds" issued by the Central Bank of Korea can temporarily replace open market operations that are still underdeveloped. Malaysia’s “Employees’ Reserve Fund” regulates liquidity by transferring government and employee reserve fund deposits from the banking system to a special account at the central bank. [10] Based on my country's specific national conditions and actual economic conditions, we can design and select intervention and sterilization financial instruments and means suitable for our country's national conditions, consolidate and develop the results of the exchange rate system reform, improve the level of monetary adjustment and exchange rate management, and make the RMB exchange rate richer Flexibility, foreign exchange sterilization work is also more efficient.