BOFIT Viikkokatsaus / BOFIT Weekly 2015/44
Deregulation of interest rates also encourages the shift to monetary policy implementation used in developed economies, i.e. use of true monetary policy interest rate as the main policy tool. Lacking this tool, China has been left with adjustment of reserve requirements as its main monetary policy option while the role of current reference rates is unclear. Further muddying monetary signalling is the fact that the central bank still provides funding directly to certain enterprises via state development banks. Moreover, bank lending remains directly subject to “window guidance,” which is neither transparent nor well suited to market economy rules.