The Chinese Interbank Markets： Cornerstone of Financial Liberalization

I.IntroductionWell-functioninginterbankmarketsareofutmostimportanceinmodernfinancialsystems.Theirpurposeistoefficientlyallocateliquidityamongfinancialinstitutionsandregions,shiftfundstoinstitutionsandregionsthatneeditmost,andallowforasmoothworkingofthepaymentsystem.1Inmostmodernbankingsystems,depositoryfinancialinstitutionsarelegallyrequiredtomaintainminimumreserves.Duetolargetemporarypayments,individualdepositoryinstitutionsmaybeeitheraboveorbelowtheirrequiredreservepositions.Sincesuchreserv…