CHINA’S INTEREST RATE PASS-THROUGH TO

COMMERCIAL BANKS BEFORE AND AFTER

INTEREST RATE LIBERALISATION
Kerry Liu*

Abstract
On 23 October 2015, the People’s Bank of China (PBoC) completed the process of interest rate liberalisation. This study examines
China’s interest rate pass-through to the lending rate of commercial banks before and after interest rate liberalisation. Based on data
from Q3, 2007 to Q2, 2016, the study shows that the interest rate pass-through from policy rate to lending rate, which was effective
before October 2015, lost effectiveness thereafter. PBoC interventions, the ‘Impossible Trinity’ theory and institutional factors may
contribute to this ineffectiveness of the policy rate pass-through, which may also be related to the higher premium for risk required
by banks and to the worsening of their financial condition. The study also offers policy advice in response to the declining
effectiveness of China’s interest rate pass-through.

JEL codes: E52, E58.

Keywords: interest rate liberalisation; interest rate pass-through; lending rate; People’s Bank of China; policy rate.

1. Introduction

On 23 October 2015, the People’s Bank of China (PBoC, China’s central bank) finally abolished the
upper bound of the deposit rate, indicating that interest rate liberalisation had been achieved.
Unlike the central banks in major developed economies, the PBoC was mainly relying on a variety
of quantity-based policy tools such as the broad money (M2) growth rate and a series of
administrative policy measures such as the benchmark lending rate. The interest rate channel in the
Chinese economy is a fairly recent development. This study assesses the interest rate pass-through1
to the lending rate of commercial banks with a special focus on the period between October 2015
and June 2016.

2. Background: the liberalisation process of China’s interest rates and policy rates

The official objective of the PBoC is to stabilise the value of the currency, thereby promoting
economic growth.2 However, on 24 June 2016 at the International Monetary Fund in Washington,
DC, the incumbent governor of the PBoC, Zhou Xiaochuan, admitted that the PBoC had multiple
objectives, not only four annual objectives such as ensuring price stability, boosting economic
growth, promoting employment, and broadly maintaining balance on the external account, but also
two dynamic objectives, namely, financial reform and opening, and financial market development
(Zhou 2016).
The PBoC was established on 1 December 1948. At first it controlled credit and money directly,
and monetary policy was mainly implemented through credit planning. With the deepening of the

*Economist at a major international bank in Sydney, Australia. Email: Kerry.luke@gmail.com. The author would like to thank
two anonymous referees and the Editor for their helpful comments on an earlier version.

© 2017 Institute of Economic Affairs

280 K. LIU

economic and financial reforms in China from 1978, there was a need for a more market-oriented
monetary policy framework. A reserve requirement ratio, open market operations and central bank
lending were introduced as the main policy tools. The PBoC has gradually developed price-based
monetary tools such as interest rates. Table A1 in Appendix A shows the major interest rates in
China’s financial system. Table A2 shows that the process of China’s (RMB) interest rate
liberalisation took almost 20 years.
The PBoC has fully liberalised its interest rate system, including money market rates, bond
market rates and deposit and lending rates. Before this interest rate liberalisation process was
complete, the PBoC was able to directly control the funding costs of banks and their lending rates to
businesses and individuals through adjusting the benchmark deposit rate and benchmark lending
rate. Thereafter, this system was assumed to be no longer working efficiently. A new price tool was
needed to perform the role of interest rate pass-through. The central banks of other major economies
have already adopted policy rate systems such as the federal fund rate in the United States, the RBA
official cash rate in Australia, the BACEN SELIC rate in Brazil, the BoE official bank rate in the
United Kingdom, the BOC key interest rate in Canada, and the Refi rate in the European Union. In
China, the Shanghai interbank offered rate (SHIBOR) and the repurchase agreement rate (repo),
which includes pledged and outright repo, are generally considered to be China’s equivalent to the
policy rates used in other economies (see e.g. Ji et al. 2016). However, as the PBoC has made no such
official claim, further analysis is needed in order to determine which rate functions as the policy rate.
First, the pledged repo has completely dominated the outright repo in terms of turnover since
2007, and we can conclude that the pledged repo is the preferred policy rate. In the repo market, the
two reference rates, namely the overnight fixed repo rate (FR001) and the seven-day fixed repo rate
(FR007), are mainly pledged repo rates.
Second, as the repo rate has collateral while SHIBOR does not, it is assumed that SHIBOR
should generally be higher than the repo rate. However, this is not the case. It is widely believed that
the PBoC may occasionally intervene in the SHIBOR market. In consequence, repo rates are more
market-oriented than SHIBOR.
Third, of the two main types of repo rate, the overnight repo rate dominates the seven-day repo in
terms of turnover. Also, the PBoC has no overnight money market instrument. It has a corridor for
operational rates and the overnight rate is not quoted in the corridor. But rates for other maturities,
such as the one-week repo, are quoted. These considerations support regarding the FR007 as the
PBoC’s new policy rate.
To summarise our analysis in this section, since the PBoC has accomplished the process of interest
rate liberalisation, the old policy rates (the benchmark deposit rate and the benchmark lending rate)
are no longer subject to PBoC regulation. There is a need for new monetary policy tool. Among the
available interest rates, the overnight fixed repo rate (FR007) is considered to be China’s policy rate.
This article examines whether a change in the benchmark lending rate can still be passed to the end
rate of commercial banks, and whether FR007 has been playing a greater role in interest rate pass-
through since October 2015, when the interest rate liberalisation process was completed.

3. Previous studies

The traditional channels of monetary policy transmission are built upon the core models of
investment, consumption, and international trade behaviour (for a comprehensive review of this
© 2017 Institute of Economic Affairs
 ECONOMIC AFFAIRS, VOLUME 37, NUMBER 2 281

topic, see Boivin et al. 2010). For investment, the key channels are the impact of interest rates on
the cost of capital and hence on business and household investment spending (e.g. residential
and consumer durables investment); for consumption, the channels operate through wealth
effects and intertemporal substitution effects; and for trade, the direct channel operates through
the exchange rate.
The quantitative effect of a change of policy rate on other interest rates will generally depend on
the extent to which the policy change was anticipated and how it affects expectations of future policy
(Monetary Policy Committee 2010). In terms of short-term interest rates, a change in the policy rate
can immediately be transmitted to other short-term money market rates. But these rates may not
change by as much as the policy rate changes. As for the impact on long-term interest rates, the
change can run in either direction. Long-term interest rates are influenced by current and expected
future short-term rates. So the direction and extent of the impact of the policy rate change on
expectations of the future path of interest rates are important; indeed, Woodford (2003) suggests that
the management of expectations is the primary responsibility of a monetary authority.
A number of studies have examined China’s monetary policy and its effect on the real economy.
Qin et al. (2005) concluded that China’s monetary instruments are most effective in affecting
monetary aggregates. Sheng and Wu (2008) found that the size of the money supply and credit
lending are the main objectives of the PBoC, and the interest rate effect is very limited. Similarly,
Egan and Leddin (2016) concluded that the majority of studies analysing aggregate demand in China
have found little or no evidence of a relation between output and monetary policy. But Nuutilainen
(2015) found some evidence of such a relation in that the monetary policy settings of the PBoC have
come to place more weight on price-based instruments.
However, none of these studies examined the monetary transmission mechanism, especially the
bank lending channel, which is the most important part of monetary policy transmission in China. Ji
et al. (2016), in the first study to examine the effectiveness of the interest rate pass-through from
policy rates to lending rates, found that changes in policy rates can influence bank lending rates. The
present study builds on Ji et al. (2016), but with a special focus on the period after the completion of
interest rate liberalisation in October 2015.

4. China’s interest rate pass-through to the lending rates of commercial banks

In this section, two topics are examined: how the interest rate pass-through from the benchmark
lending rate to the lending rate of commercial banks has changed after interest rate liberalisation, and
how change in the PBoC’s policy rate (FR007) influences the lending rate of commercial banks.

4.1. Data
Because China’s commercial banks do not disclose their quarterly lending rates, the lending rate data
are processed manually. The lending rate of the commercial banks is defined as the annualised
quarterly lending rate, calculated as the quarterly interest income on interest-earning assets. The
interest-earning assets include: loan balances; deposits with other banks and other financial
institutions; debit funds; transactional, held-to-maturity and available-for-sale financial assets; resale
financial assets; and investments. They exclude receivable loans.
© 2017 Institute of Economic Affairs
282 K. LIU

The benchmark lending rate is the quarterly average of the six-month to one-year benchmark
lending rate. The policy rate is the quarterly average of FR007.
Among other control variables, the deposit liability ratio is defined as deposits over total liability;
the profitability variable is return on equity (ROE); the size variable is the natural log value of total
assets; and the loan deposit ratio is defined as loans over deposits (it controls the prudential
regulation requirement of a 75 per cent limit, which was abolished in October 2015). Another
variable is the reserve ratio. 2015Q3Dummy is a dummy variable to control the effect of interest rate
liberalisation. It equals 1 if the time period is after Q3, 2015.
All data items are taken from the quarterly financial reports of 19 listed banks3 in China ranging
from Q3, 2007 to Q2, 2016, obtained from Wind.4

4.2. Regressions and discussion

The model specifications are presented in Appendix B, and the regression results are presented at
Table 1. Model 1 does not consider the effect of interest rate liberalisation; Model 2 does.
Table 1 shows that Model 1, which does not consider the interest rate liberalisation effect, works
very well. The signs of the coefficients of FR007 and the benchmark lending rate are both
significantly positive (within 5 per cent confidence level), suggesting that interest rate pass-through
from both FR007 and the benchmark lending rate to the interest rates commercial banks charge on
their loans is effective. Specifically, a one standard deviation increase of FR001 can cause a 0.43
standard deviation increase of lending rate, and a one standard deviation increase of benchmark
lending rate can cause a 0.19 standard deviation increase of lending rate.
Model 2 considers the effect of the interest rate liberalisation. In October 2015, the upper bound
of the deposit rate for all kinds of financial institutions was abolished. It signified the completion of
the interest rate liberalisation process. The coefficients of the benchmark lending rate and interaction
term Benchmark Lending Rate*2015Q3Dummy are still positive but are both insignificant. It

Table 1: Regression results from Q3,2007–Q2,2016 without (model 1) and with (model 2) consideration of the effect of interest
rate liberalisation
Model 1 Model 2

Variable Coefficient Probability (%) Coefficient Probability (%)

Constant 0.133 0.0 0.134 0.0

FR007 (policy rate) 0.430 0.0 0.472 0.0
FR007*2015Q3Dummy –0.828 0.7
Benchmark lending rate 0.190 1.4 0.150 12.9
Benchmark Lending Rate*2015Q3Dummy 0.255 20.9
2015Q3Dummy 0.008 45.1
Deposit liability ratio –0.066 0.0 –0.065 0.0
Loan deposit ratio –0.046 0.0 –0.045 0.0
Reserve ratio –0.043 4.1 –0.038 7.8
Return on equity –0.110 0.1 –0.111 0.0
Ln(size) 0.000 83.2 0.000 89.2

Adjusted R-squared 0.361 0.367

Number of observations 488 488

Notes: Cross-section fixed dummy variables are included and panel least squares are applied. Dependent variable: Lending rate.

© 2017 Institute of Economic Affairs

 ECONOMIC AFFAIRS, VOLUME 37, NUMBER 2 283

suggests that the benchmark lending rate system, which was directly controlled by the PBoC before
October 2015, no longer works following the interest rate liberalisation.
The coefficient of FR007 from Model 2 is still significantly positive, suggesting an overall effective
pass-through from FR007 to the lending rate. However, the coefficient of the interaction term
FR007*2015Q3Dummy is significantly negative (within the 1 per cent confidence level), suggesting
that FR007 has been negatively associated with the lending rate after Q3, 2015. The rationale is as
follows. Since October 2015, the PBoC has been facing great pressure from capital outflow. As a
result of increasing capital outflow and liquidity reduction, China’s policy rate FR007 has been
increasing. At the same time, Chinese governments and regulatory authorities have exerted
considerable pressure on commercial banks to reduce financing costs for businesses. For example,
one of China’s five key economic tasks in 2016 has been to reduce financing costs for companies
(Bloomberg News 2015). Strong interventions and window guidance from regulatory authorities and
governments, which are not targeting enhancing the interest rate pass-through, have contributed to
this negative relation between policy and lending rates. Although the policy rate is assumed to be
playing a more important role after October 2015, it seems that this has not happened. The overall
contribution from the policy rate FR007 to interest rate pass-through is negative (0.472 + (–0.828)).
Since the interest rate liberalisation process was completed in October 2015, the benchmark
lending rate system has lost its effectiveness; and the policy rate has not begun to play a greater role as
expected. The PBoC has increasingly relied on unconventional tools such as Pledged Supplementary
Lending (PSL; see Table A1 for a detailed explanation) to stimulate its economy by mainly lending to
policy banks such as the China Development Bank (CDB) to invest in infrastructure projects. During
May 2015–September 2016, the size of PSL has been increasing dramatically while the PSL interest
rate has been decreasing. The CDB has been the main policy bank in China performing the role of
stimulating the economy. As the CDB is not a listed bank, the details of its investments and financing
are not available to outsiders. But financial market data show that besides PSL, the CDB has also
issued more and more mid- to long-term bonds, especially long-term bonds after October 2015 to
raise money for investing in infrastructure projects to stimulate the economy. In a word, since
October 2015 China’s policy rate has not begun, as expected, to play a greater role. Also, the interest
rate pass-through from benchmark lending rate to lending rate has become ineffective. Under such
circumstances, the PBoC has begun to rely more on unconventional tools.

5. Conclusions

The PBoC reached the end of the long road of interest rate liberalisation by abolishing the upper
bound of the deposit rate in October 2015. During this process, the PBoC also gradually
established a series of price-based monetary tools. It was expected that China’s policy rate would
play a more important role after October 2015, just as it does in other developed economies. This
study shows that this did not happen. The benchmark lending rate and FR007 could be passed to
the lending rate of commercial banks before October 2015. After October 2015, the benchmark
lending rate pass-through has lost its effectiveness, as expected, but the policy rate FR007
pass-through did not improve as expected. On the contrary, there is a negative association between
FR007 and the lending rate.
Frequent interventions from the PBoC and other regulatory authorities, many of which are not
aiming to improve the interest rate pass-through, may contribute to this negative association between
© 2017 Institute of Economic Affairs
284 K. LIU

FR007 and the lending rate. The ‘Impossible Trinity’ also plays a role (Obstfeld et al. 2005).
According to this theory, it is impossible to have at the same time all three of a fixed foreign
exchange rate, free capital movement and an independent monetary policy. A feedback loop
between the exchange rate and capital inflow exists in the form of a multiplier mechanism that
jeopardises both monetary autonomy and exchange-rate stability (Wu 2015). The PBoC
suddenly announced a new reform measure of RMB central parity formation mechanism5 and
depreciated RMB by 1.9 per cent on 11 August 2015. Between August 2015 and June 2016,
China faced a continual large capital outflow. China’s monetary independence has deteriorated
significantly, and its interest rate pass-through to government bonds has totally disappeared
(Liu 2017).
Ji et al. (2016) have also suggested that certain institutional factors impede the effectiveness of
interest rate pass-through, such as the still relatively large volatilities of FR007, the
underdeveloped state of China’s derivative securities market, and the fact that most Chinese banks
still mainly rely on deposits as their funding source. However, from a dynamic viewpoint, as
Gambacorta et al. (2014) have argued, this lower pass-through seems to be related in part to the
higher premium for risk required by banks and by the worsening of their financial condition as
well. The Chinese economy has been facing downward pressure since 2015, by the end of which
economic growth had cooled to a 25-year low. The Earnings Before Interest and Tax over Total
Assets (EBIT) ratios for sectors including energy, materials, industrials, discretionary consumption
goods, non-discretionary consumption goods, health-care services and financial services have been
declining since around 2011. The only exceptions are telecommunication services and information
technology.6 The contraction or slowing down in economic activity may have increased the
likelihood that borrowers would be unable to repay their loans. The non-performing loan ratio of
Chinese commercial banks has been consistently increasing, from 0.94 per cent as of Q2, 2012 to
1.75 per cent as of Q2, 2016, which is almost the same period when businesses have been facing
declining returns on assets.7
The interest rate pass-through from FR007 has become ineffective since the process of interest
rate liberalisation was completed in October 2015. This conclusion is generally accepted by Chinese
government officials. For example, Chinese Finance Minister Lou Jiwei said that ‘monetary tools
were becoming less effective’ (Strupczewski and Heller 2016). Chief Executive Officer Jamie Dimon
from JPMorgan Chase & Co also said that global monetary policy tools had lost their effectiveness
(Son and Yoon 2016), although further discussion on the effectiveness of global monetary policy is
beyond the scope of this article.
Given the ineffectiveness of interest rate pass-through, China should focus more on structural
reforms than on short-term countercyclical monetary stimulus. Lu and Cai (2014) suggest that the
slowing of GDP growth in recent years reflects a decline in the potential growth rate rather than a
cyclical downturn. The Chinese authorities should implement more reform measures to enhance
productivity and labour participation. Possible areas for further reform include the hukou system,8
population (fertility) policy, education and training institutions, and unproductive state-owned
enterprises. Such reform could be expected to boost labour force participation, human capital
accumulation and total factor productivity growth, thereby raising the potential GDP growth rate.
This article is one of very few studies that examine the interest rate pass-through in China,
and is the first to examine the effect of interest rate liberalisation on interest rate pass-through
in China. Its conclusions have important implications for policymakers, businesses, investors
and academia.
© 2017 Institute of Economic Affairs

Appendix A: Tables
Table A1: Main interest rates in China
Interest rate
PBoC repurchase agreement (repo) rate
Rate on required reserve ratio (RRR)
Rate on excessive reserve
Benchmark lending rates
Short-term liquidity operations (SLO)
Standing lending facility (SLF) rate
Medium-term lending facility (MLF) rate
Pledged supplementary lending (PSL) rate
Shanghai interbank offered rate (SHIBOR)
Pledged repo rate
Outright repo rate
Loan prime rate (LPR)
Sources: PBoC; China Foreign Exchange Trade System; Wind.
Table A2: The liberalisation process of (RMB) deposit and lending rates in China
Lending rate
Jan 1987: commercial banks allowed to charge up to
1.2 times of benchmark lending rate on their loans
1996–2004: gradually expanding the ceiling of the
lending rate to 1.7 times benchmark lending rate
Oct 2014: upper bound of lending rate abolished
ECONOMIC AFFAIRS, VOLUME 37, NUMBER 2 285
Description
Repo is the operation whereby the PBoC takes back liquidity from
the market. With reverse-repo, it injects liquidity into the market
The current level of RRR for banks is 17.5%, on which the PBoC
pays an interest rate of 1.62%
The PBoC pays an interest rate of 0.72% on banks’ excessive reserves
in their central bank accounts
Benchmark interest rates set by the PBoC for commercial banks to
charge on loans
SLO normally operate to satisfy temporal liquidity needs with maturities
of less than seven days
The SLF rate is mainly for the PBoC’s lending to specified policy banks
and commercial banks with maturities ranging from one to three months.
SLF rates are determined on a case-by-case basis
The MLF rate is for the PBoC’s lending to specified policy banks and
commercial banks with maturities ranging from three to twelve months.
The MLF rates are determined on a case-to-case basis
The PSL rate is the rate at which policy/commercial banks use collateral
to borrow from the PBoC with maturities ranging from three to five years.
It is expected to provide important guidance for the prospective trajectory
of medium-term interest rates
SHIBOR is a daily reference rate based on the interest rates at which a
group of banks with high credit quality offer to lend unsecured funds to
other banks in the Shanghai wholesale (or ‘interbank’) money market
Pledged repo is a type of short-term financing business whereby bonds are
used by both trading parties as a pledge of rights. It refers to a financing
act in which borrower (repo party) pledges bonds to lender (reverse repo
party) for funds, and at the same time the two parties agree that when at
a future date repo party returns the amount of funds calculated at the
specified repo rate to the reverse repo party, the reverse repo party shall
lift the pledged rights on the pledged bonds
Outright repo refers to a trading business where, at the time when a
bondholder (repo party) sells bonds to a buyer (reverse repo party), the
two parties at the same time agree upon at a future date when a repo party
shall buy from the reverse repo party an equal number of the same type of
bonds at a predefined price. The difference between buying back and
selling prices is the outright repo rate
LPR is the weighted average rate of interest charged on loans by financial
institutions to their high-quality clients
Deposit rate
Oct 2004: implementation of deposit rates downward floating system
Jun 2012: upper bound of deposit rate floating range adjusted to be
1.1 times benchmark deposit rate
Nov 2014: upper bound of the floating range of deposit rates adjusted
to be 1.2 times benchmark deposit rate
(Continues)
© 2017 Institute of Economic Affairs
286 K. LIU

Table A2 (Continued)

Lending rate Deposit rate

Jun 2012: lower limit of lending rate adjusted to
be 0.8 times benchmark lending rate
Jul 2012: lower limit of lending rate adjusted to
be 0.7 times benchmark lending rate
Jul 2013: lower bound of lending rate abolished
Mar 2015: upper bound of the floating range of deposit rates adjusted
to be 1.3 times benchmark deposit rate
May 2015: implementation of deposit insurance system lay foundation
for further liberalising deposit rate
May 2015: upper bound of the floating range of deposit rates adjusted
to be 1.5 times benchmark deposit rate
Jun 2015: market-oriented pricing Certificates of Deposit introduced
Aug 2015: upper floating range for term deposits with a term of one
year or more (excluding one year) abolished
Oct 2015: upper bound of deposit rate for all kinds of financial
institutions abolished

Sources: PBoC; Wind.

Appendix B: econometric model specifications

Model 1 (does not consider effect of interest rate liberalisation)

Lending Rate i,t = δ0+ δ1
FR007 i,t + δ2
Benchmark Lending Rate i,t + δ3
Deposit Liability Ratio i,t + δ4
Loan Deposit Ratio i,t + δ5
Reserve Ratio i,t + δ6
ROE i,t + δ7 Ln(size) i,t + fixed effects + ε

Model 2 (considers effect of interest rate liberalisation)

Lending Rate i,t = δ0+ δ1
FR007 i,t + δ2
FR007 i,t *2015Q3Dummy + δ3
Benchmark Lending Rate i,t + δ4
Benchmark Lending Rate i,t *2015Q3Dummy i,t + δ5
Deposit Liability Ratio i,t + δ6
Loan Deposit Ratio i,t + δ7
Reserve Ratio i,t + δ8
ROE i,t + δ9 Ln(size) i,t + δ10 2015Q3Dummy + fixed effects + ε

Notes
1. The pass-through rate is the net interest the issuer of a mortgage-backed security pays investors after all other costs and fees
are settled. This rate is always less than the average interest rate paid by the borrower on the mortgages backing the security.
2. http://www.pbc.gov.cn/english/130727/130867/index.html (accessed 11 April 2017).
3. They are the Agricultural Bank of China, Bank of China, Beijing Bank, Bank of Communications, China Construction
Bank, CITIC Bank, China Merchant Bank, Overbright Bank, Guiyang Bank, Huaxia Bank, Industrial and Commercial
Bank of China, Industrial Bank, Jiangyin Bank, Minsheng Bank, Nanjing Bank, Ningbo Bank, Pudong Development Bank,
Pingan Bank and Wuxi Bank.

© 2017 Institute of Economic Affairs

 ECONOMIC AFFAIRS, VOLUME 37, NUMBER 2 287

4. Wind is the mostly widely used provider of Chinese economic and financial data and information. It serves more than 90% of
the financial firms in the Chinese market, and also serves 75% of the qualified foreign institutional investors in china. See
http://www.wind.com.cn/en/wft.html (accessed 11 April 2017).
5. Since July 2005, the RMB has been allowed to trade within a defined band around the daily official fixing or central parity
announced by the PBoC. The central parity rate was based on a trimmed weighted average of prices from designated
liquidity providers, and the currency weights were set discretionally. On 11 August 2015, the RMB–US dollar central parity
formation mechanism was changed, and the daily fixing is set with reference to the previous day’s closing rate of the RMB,
foreign exchange market demand and supply, and exchange rate movements in other currencies. For more information, see
Liu (2016).
6. See Wind at http://www.wind.com.cn/en/ (accessed 20 April 2017).
7. See Wind at http://www.wind.com.cn/en/ (accessed 20 April 2017).
8. A hukou is a record in a government system of household registration required by law in mainland China. It determines
where citizens are allowed to live.

References
Bloomberg News (2015) ‘China Leaders Flag More Stimulus After Top Economic Meeting’, 21 December. https://www.
bloomberg.com/news/articles/2015-12-21/china-says-monetary-policy-must-be-more-flexible-as-growth-slows
(accessed 11 April 2017).
Boivin, J., M. T. Kiley and F. S. Mishkin (2010) How Has the Monetary Transmission Mechanism Evolved Over Time?
NBER Working Paper No. 15879. Cambridge, MA: National Bureau of Economic Research.
Egan, P. G. and A. J. Leddin (2016) ‘Examining Monetary Policy Transmission in China – Structural Change Models
with a Monetary Policy Index’, Asian Development Review 33(1), 74–110.
Gambacorta, L., A. Illes and M. J. Lombardi (2014) Has the Transmission of Policy Rates to Lending Rates Been
Impaired by the Global Financial Crisis? BIS Working Papers No. 477. Basel: Monetary and Economic
Department, Bank for International Settlement.
Ji, M., X. Zhang, M. Niu and J. Ma (2016) 货币政策通过银行体系的传导 [The effectiveness of transmission of short-
term market rates to lending rates]. People’s Bank of China Working Paper No. 2016/4. Beijing: People’s Bank of
China.
Liu, K. (2016) ‘Chinese RMB after 11 August 2015’, JASSA: The Finsia Journal of Applied Finance, Issue 4, 11–20.
Liu, K. (2017) China’s Interest Rate Pass-through to Government Bonds and Monetary Independence. Working paper.
Lu, Y. and F. Cai (2014) ‘China’s Shift from the Demographic Dividend to the Reform Dividend’, in L. Song, R.
Garnaut and F. Cai (eds), Deepening Reform for China’s Long-term Growth and Development. Canberra:
Australian National University Press.
Monetary Policy Committee (2010) The Transmission Mechanism of Monetary Policy. London: The Bank of England.
http://www.bankofengland.co.uk/publications/Documents/other/monetary/montrans.pdf (accessed 11 April 2017).
Nuutilainen, R. (2015) ‘Contemporary Monetary Policy in China: A Move Towards Price-based Policy?’, Pacific
Economic Review 20(3), 461–486.
Obstfeld, M., J. C. Shambaugh and A. M. Taylor (2005) ‘The Trilemma in History: Tradeoffs among Exchange Rates,
Monetary Policies, and Capital Mobility’, The Review of Economics and Statistics 87(3), 423–438.
Qin, D., P. Quising, X. He and S. Liu (2005) ‘Modelling Monetary Transmission and Policy in China’, Journal of Policy
Modelling 27(2), 157–175.
Sheng, S. and P. Wu (2008) 中国货币政策的二元传导机制 [The dualistic transmission mechanism of China’s monetary
policy], Economic Research Journal 43(10), 37–51.
Son, H. and S. Yoon (2016) ‘Dimon, Cohn Say Global Monetary Policy Becoming Less Effective’, Bloomberg, 7
October. https://www.bloomberg.com/news/articles/2016-10-07/dimon-cohn-say-global-monetary-policy-
becoming-less-effective (accessed 11 April 2017).
Strupczewski, J. and G. Heller (2016) ‘G20 Nations Pledge to Bolster Defenses Against Brexit Headwinds’, Reuters, 23
July. http://www.reuters.com/article/us-g20-china-idUSKCN103043 (accessed 11 April 2017).
Woodford, M. (2003) Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton, NJ: Princeton
University Press.
Wu, Y. (2015) ‘The Open-Economy Trilemma in China: Monetary and Exchange-Rate Policy Interaction under
Financial Repression’, International Finance 18(1), 1–24.
Zhou, X. (2016) ‘PBOC Governor on Multi-Objective Monetary Policy’, China SME Online, 27 June. http://www.sme.
gov.cn/cms/news/100000/0000000375/2016/6/27/09559ee8186e4bc58ff9d62e8c68c8f9.shtml (accessed 11 April
2017).

© 2017 Institute of Economic Affairs