First, the changes in China's deposit and loan interest rates are mainly adjusted by the central bank according to China's financial market and macroeconomic conditions.
Interest rate plays an important role in China's economic regulation. 1990- 199 1 year, China lowered the deposit interest rate for three consecutive times and the loan interest rate for two consecutive times. 1993 raised the deposit and loan interest rates twice in a row; From 1996 to 2002, the deposit interest rate was lowered for 8 consecutive times, and the loan interest rate was lowered for 7 consecutive times. In June 5438+February 65438+September 2004, the deposit and loan interest rates were raised at the same time; On April 28, 2006, the loan interest rate was raised; On August 19, 2006, the deposit and loan interest rates were raised simultaneously. See figure 1 and figure 2 for the changes of deposit and loan interest rates in China. The adjustment of interest rate level in China has played an important role in macroeconomic operation and controlling inflation and deflation. If the macro economy is overheated and the price level rises, it will raise interest rates; If the macroeconomic growth is weak and the price level drops, the interest rate will be lowered. Therefore, the adjustment of China's interest rate level is more in line with the price level, that is, the price level rises and the interest rate rises; When the price level drops, the interest rate drops (see Figure 3).
Because the interest rate in China is not fully marketized, the interest rate transmission mechanism in China shows its particularity. The central bank's regulation of interest rates will affect deposits and loans, further affect consumption and investment, and the changes in real estate market prices.
Second, the impact of interest rates on the macro economy.
1 From 1 May 19961to February 2, 20021,the People's Bank of China lowered the deposit and loan interest rates of commercial banks for eight consecutive times. Since the interest rate levels 1993 and 1 1 adjusted in July were set for the high price level of 1993- 1995, after 1996 successfully realized the "soft landing" of the macro economy, the interest rate level also followed. Interest rate adjustment plays an important leverage effect and is an important monetary policy tool of the central bank.59986.999999999895 In view of the negative price growth from June 1997 to October 10, the central bank lowered the deposit and loan interest rates for five consecutive times in order to relax the money supply and stimulate economic growth. In 2003, some industries blindly repeated construction, and energy transportation appeared a rare bottleneck restriction for many years, and inflationary pressure increased. The central bank adopts monetary policy tools such as open market operation, credit window guidance and adjusting the deposit reserve ratio of financial institutions to regulate and control the overheated macro-economy. In order to consolidate the control results, the deposit and loan interest rates of commercial banks were raised on October 29th, 2004. With the advancement of interest rate marketization, what is the effect of interest rate adjustment at different stages on macro-control? We use the monthly data of 1993 from July to September 2005 to make a phased comparison.
The last rate hike before the eight interest rate cuts was1July 993 1 1, and the one-year deposit rate of commercial banks was adjusted to 10.98%, so the analysis period began from1August 993. Judging the comprehensive effect of interest rate regulation through data analysis during the whole analysis period; Based on the data before 2004 1 October 29th, 65438+, this paper analyzes the impact of eight interest rate cuts on the increase of deposits and loans, which is divided into two stages with199865438+1October1as the boundary. According to the data since 1998, the adjustment function of interest rate in indirect economic environment is analyzed. On June 1996 and 1 day, the interest rate in the interbank lending market was liberalized, which marked the substantial stage of interest rate marketization. This paper analyzes the data after 1996, and investigates the influence of interest rate marketization on the effect of interest rate regulation.
Generally speaking, the adjustment of interest rate has little effect on the change of total deposits and loans (see table 1). From1August 1993 to September 2005, the one-year nominal deposit interest rate was negatively correlated with the monthly increment of savings deposits, and the correlation coefficient was -0.3 1. The one-year real deposit interest rate 1 has little correlation with the monthly increment of savings deposits, and the correlation coefficient is-0.33; The correlation coefficients of one-year nominal loan interest rate, actual loan interest rate and monthly loan increment are -0.20 and -0. 1 1 respectively. 1 996 from may1day to February 2 1 day, China people's bank lowered the deposit and loan interest rates of commercial banks for eight consecutive times. During this period, the correlation coefficients between the one-year nominal deposit interest rate, the real deposit interest rate and the monthly increment of savings deposits are -0.28 and -0.27 respectively, that is, the nominal interest rate and the real interest rate are the same. There is also a weak negative correlation between one-year loan interest rate and loan increment. Examining the effect of interest rate reduction by stages, except that the one-year deposit interest rate before 1998 is weakly positively correlated with the deposit increment, the other correlation coefficients are all negative, and the absolute value of the correlation coefficient is very small. Especially, the indirect regulation effect and interest rate marketization effect are analyzed. The results show that with the decline of deposit interest rate, the amount of savings deposits does not fall, but rises. The adjustment of loan interest rate has little effect on the increase of loans. In a word, the adjustment of interest rate has little effect on the increase of deposits and loans.
From the empirical analysis, there is no theoretical correlation between the change of deposit and loan quantity and the adjustment of deposit and loan interest rates. The main reasons are as follows:
1. China residents' savings are not sensitive to interest rate changes. At present, savings is the only investment method for most residents in China, because savings is the safest investment method.
2. China's stock market is risky, the secondary market of national debt is underdeveloped, the variety of financial instruments is few, and the investment products that residents can choose are limited, all of which lead to lower interest rates and increased savings.
3. Because China is in the period of economic transition, many systems are still immature, and the uncertainty in the future is increasing, so residents' demand for preventive currency is rising, and residents are willing to save.
Investigate the correlation between interest rate and household consumption. Theoretically, if the interest rate is lowered, residents' savings income will be reduced, and the borrowing cost will also be reduced, so consumption should be increased; On the contrary, if interest rates are raised, consumption will decrease. Now let's examine the relationship between the change of one-year deposit interest rate and the change of per capita consumption in China (see Figure 4).
Judging from the data reflected in the figure, there is not much correlation between consumption and interest rate. The weak correlation between consumption and interest rate may be caused by the following reasons:
1. China is at the level of a developing country. For ordinary wage earners, the main factor that determines their consumption expenditure is income level, not interest rate.
2. In recent years, there have been several important reform projects in China: education, medical care, old-age insurance and housing marketization, which are still immature. It makes residents' expenditure expect to increase, tries to control other consumption expenditure, and tends to save for future needs.
3. Due to the fierce competition in the labor market and the high demand for labor quality, some old employees are laid off, and a large number of new laborers join in every year, the number of unemployed people rises, causing residents' pessimistic expectations of income, further increasing their propensity to save and reducing their propensity to consume. Therefore, although interest rates have been lowered, savings and consumption have not changed accordingly.
4. Compared with the mature market economy in developed countries, the degree of marketization of China's economy still needs to be further improved. Interest rate adjustment is often out of touch with macroeconomic aggregate changes, and residents' response to interest rate changes is often lagging behind.
We analyze the correlation between interest rate and investment. The data we use are the one-year loan interest rate and the growth rate of fixed assets investment in the whole society. The one-year loan interest rate can reflect the level of the whole loan interest rate structure to a certain extent.
From the situation reflected in Figure 5, the response of investment to interest rate is very slow, and there is no obvious correlation. For a long time, China's state-owned enterprises have not formed a good corporate governance system, the investment efficiency is low, and they are more extended to expand reproduction, without forming a good mechanism of self-restraint, self-development, independent operation and self-financing. At the same time, there is no good credit constraint mechanism between enterprises and banks. China's commercial banks also have the problem of not strictly screening enterprise information.
Third, the impact of interest rates on the real estate market.
The real estate industry is the pillar industry of China's national economy, and the added value of China's construction and real estate industry accounts for about 10% of GDP. Real estate is both consumer goods and investment goods. After 1998, China cancelled the implementation of the housing distribution system in kind and the housing mortgage policy, and the national financial department continued to increase its support for real estate.
1998, when the benchmark loan interest rate exceeds 10%, individuals are reluctant to buy a house, and the housing system reform has made little progress. The People's Bank of China decided to implement preferential interest rates for residents' housing loans. 1September 1999, the People's Bank of China adjusted the term and interest rate of individual housing loans, and extended the maximum term of individual housing loans from 20 years to 30 years. At the same time, preferential interest rates are implemented for housing loans with self-owned accounts, with fixed interest rates of less than 5 years and more than 5 years (see Table 2). The loan interest rate for less than five years is 5.3 1%, and the loan interest rate for more than five years is 5.58%. In order to encourage individual residents to buy houses, on February 2, 2002, the People's Bank of China lowered the interest rate of housing loans, and the two interest rates were lowered to 4.77% and 5.04% respectively.
At the same time, the state has also made corresponding adjustments to the term of provident fund loans. The interest rate of provident fund loans for more than five years is 4.59%, and that for less than five years is 4. 14%. On February 2 1 2002, the People's Bank of China lowered the interest rate of individual housing provident fund loans again, from the current 4. 14% to 3.6% for less than five years, and from the current 4.59% to 4.05% for more than five years (see Table 3).
According to the national monthly housing prosperity index published by the National Bureau of Statistics, China's real estate industry began to enter the recovery stage in 1998, and the national housing prosperity index exceeded 100. By 200 1, the national housing prosperity index will exceed 106, and the rising speed of the index will be obviously accelerated. By 2003, the national housing boom index exceeded 107. Since 1998, the balance of individual housing commercial loans in China has increased rapidly, from190 billion yuan at the end of 1997 to1592.23 billion yuan in 2004. In the past seven years, the balance of individual housing loans has increased by about 84 times, and 83 billion yuan of housing provident fund loans were issued at the end of 1998.
Especially in recent years, real estate prices are at a high level. Although the increase of real estate prices has declined, the annual increase of commercial housing prices is still above 6%, especially by the end of 2004, exceeding 10% (Figure 6).
While the country is promoting the steady and rapid development of the real estate industry, there is a phenomenon that the investment momentum is too strong and the real estate price continues to rise. In order to prevent the real estate bubble, the People's Bank of China began to raise interest rates and reduce investment and demand. At the same time, it also raised the interest rate of individual housing loans. On June 29th, 2004, the interest rate of individual housing commercial loans was raised to 4.95% and 5.31%respectively. The interest rate of housing provident fund loans increased to 3.78% and 4.23%. The central bank hopes to reduce the housing demand by raising the loan interest rate, so as to maintain the stable development of the real estate market.
In March 2005, the People's Bank of China adjusted the interest rate pricing mechanism of individual housing loans in a market-oriented way. On March 17, 2005, the People's Bank of China adjusted the personal housing loan policy of commercial banks and restored the preferential interest rate of housing loans to the same level. At the same time, the People's Bank of China implements the lower limit management, and the lower limit interest rate is 0.9 times of the benchmark interest rate of the corresponding term and grade loans (see Table 4). Contradictions such as excessive investment growth, excessive money and credit, and excessive foreign trade surplus are still outstanding this year. The People's Bank of China decided to continue to raise the benchmark interest rate of RMB deposits and loans of financial institutions from August 19, 2006. At the same time, the People's Bank of China further promoted the marketization of commercial individual housing loan interest rates, and expanded the lower limit of interest rates from 0.9 times to 0.85 times of the benchmark loan interest rate.
Because the term of housing loan is usually longer than five years, the interest rate of housing loan has increased by 5.814%-5.751%= 0.063%, which is not significant compared with the increase of loan interest rate, and the state has certain protection and support for housing consumption.
In fact, the increase of interest rate will often push the price of real estate, because the increase of loan interest rate will increase the investment cost of real estate developers, thus transferring this cost to consumers; The increase of consumer loan interest rate means that the repayment amount of consumers will increase in the future, and the cost of purchasing homogeneous real estate will also increase, which will inevitably lead to the increase of real estate prices. Therefore, for China's real estate market, the increase of the central bank's interest rate should be cautious. The significance of the central bank's interest rate adjustment is to send a signal to the market and investors to be alert to the danger of the real estate bubble. In fact, China's real estate demand curve HD is not normal, but inclined to the upper right. With the increase of interest rate, the demand for real estate (including investment and consumption) increases, because it is expected that the demand for real estate will not decrease due to the increase of interest rate in the future, because most residents think that the benefits brought by the future price increase will exceed the costs brought by the increase of interest rate. Assume that the supply curve HS of real estate is vertical, the initial interest rate level is r 1, HD is greater than HS, and the excess demand is AB. If the interest rate rises to r2, the excess demand is CD, and CD is greater than AB, the increase in interest rate will further expand the excess demand (see Figure 7), so the more government intervention, the faster the price rises.
At present, China's real estate investment and demand are too strong, and there is asymmetry in the adjustment. When the country promotes consumption and investment by lowering the loan interest rate, consumption and investment are highly sensitive to interest rates and the effect is good. When the government raises the loan interest rate and reduces the real estate investment and demand, the sensitivity of enterprises and residents to the interest rate is relatively weak, mainly because the land supply is limited and the housing demand is great. At the same time, the public expects that prices may rise further in the future, increasing current demand. At present, the price of real estate regulation in China is rising rapidly. First, we should increase the supply of affordable housing; The second is to reduce the demand for speculative housing. Therefore, on the basis of interest rate regulation, the state comprehensively controls the excessive growth of real estate prices through administrative, financial, regulatory and land policies to achieve steady growth of real estate.
note:
1 Here the nominal interest rate minus the consumer price index is the real interest rate.
According to the relevant policies of the central bank, the new interest rate will be implemented for the mortgage that has been processed before the interest rate adjustment, and the new mortgage that has been processed after the interest rate adjustment will directly implement the new interest rate.
About the author:
Lu Qianjin postdoctoral fellow in economics Fudan University Department of International Finance
Lu Qingjie postdoctoral workstation of Shanghai Futures Exchange and postdoctoral mobile station of Shanghai Jiaotong University.