The Independence Of the Chinese Central Bank

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 banks; the bank of controlling macro-economy. The main difference between the central bank and the commercial banks is that the purpose of the central bank is not to make a profit, the purpose of the central bank is to give the service to the aim of the country’s macro-economy.

Therefore, the problem of the central bank’s independence is how much decision-making power the central bank has in making and carrying out monetary policy, controlling and managing the finance. The degree of the central bank’s independence is determined by its legislation definition and when the central bank uses its decision-making power, the extent of the central bank is subject to the government. In a way, the problem of the central bank’s independence is the confirmation problem of the central bank’s legal status and the relationship between the central bank and the government.

1.2 Background

Now many countries put the stability of currency value as the most important function of the central bank. During the First...

... middle of paper ...

...Sep.2008).

LanJiPing. (2008) Do the international conspiracy lead to the inflation in China? www.shxb.net (Access date 29 Aug.2008)

LiuFuShou. (2004) ‘The Bei’s view of strengthening the independence of Chinese central bank’ Journal of Finance and Economics 6 pp.38-42

Ottmar, I. (2006) ‘Central Bank Independence - Economic and Political Dimensions’ Journal of National Institute Economic Review 196 pp.66-76

WangJiaFu and ChenXiao and LiuJing. (2001) The investigation on the relationship between the central bank and government www.chinalawedu.com (Access date 26 Aug.2008)

XuBing. (2007) The ideal goal mode and realizable way of People’s Bank’s organization quality www.lunwentianxia.com (Access date 1 Sep.2008)

ZhuDaQi. (2006) The law confirmation and realization of the independence of Chinese central bank. www.chinalawedu.com (Access date 27 Aug.2008)