The Independence Of the Chinese Central Bank Essay

1928 Words 8 Pages
The Independence of the Chinese Central Bank

1. Introduction
How much degree of the independence the country’s central bank has? It concerns whether the country’s monetary policy is reasonable and scientific; whether the stability of currency value is ensured; whether the country’s economy could have a healthy development. The problem of the central bank’s independence is one of the most important problems of a country’s finance and legal development.
1.1 Definition
The central bank is a special financial institution, which has the power (given by the government)of making and carrying out monetary policy, giving the national economy control and management. The central bank is the bank of government; the bank of issue; the bank of
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The independence of the central bank was destroyed. It leaded to the serious inflation in most countries after the First World War.

This graph below is a practice study completed by the scholar of Harvard in1990. They use national economy statistical datum from 17 countries from 1951 to 1988.
The independence of central bank Country The rate of inflation
Very high Germany Switzerland 3.1%
A little high America Holland Japan Canada 4.4%
A little low France Britain Denmark Sweden Belgium etc. 6.0%
Very low Australia New Zealand Ireland etc. 7.5%

Through the study they get the conclusion that the rate of inflation increases when the independence of the central bank decreases.
Source:http://www.chinalawedu.com/news/2004_9/22/1117238217.htm

Many developed countries such as Britain, Japan and Korea enhanced the central bank’s independence after they went through a serious financial crisis. Without the independence of the central bank, the stability of monetary policy and macro-economy cannot get the guarantee. The independence of the central bank is very important.

People's Bank of China became the central bank of China since 1984, its independence is enhanced and completed continuously. Nevertheless, it is still insufficient in some aspects. In the following article, I want to talk about these problems and give several solutions.

2. Problem
2.1 Lacking the independence of organization
“The People's Bank of China

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