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“Goldilocks” Liberalization: The Uneven Path Toward Interest Rate Reform in China

Published online by Cambridge University Press:  24 March 2016

Victor Shih
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Nearly two decades after central bankers began to call for interest rate liberalization, the central bank continues to impose stringent rules on the fluctuation of deposit interest rates. This seems an unlikely outcome given widespread endorsement of liberalization by technocrats and experts both in and out of the government, China's accession to the World Trade Organization, and the technocrats' insulation from popular pressure. To be sure, local interests and central bank lobbying have driven gradual liberalization of interest rates. However, senior Chinese technocrats held on to control over interest rates because of their need to maintain state banks' dominance and to mobilize bank funds in times of economic downturns. As such, progress toward interest rate liberalization only took place during “Goldilocks” phases when the economy enjoyed healthy growth without high inflation.

Keywords

monetary policyChinainterest ratetechnocratsinterest groupsauthoritarian regimesreform
Type
Articles
Information
Journal of East Asian Studies , Volume 11 , Issue 3 , December 2011 , pp. 437 - 465
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Copyright © East Asia Institute 

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