Abstract: An empirical research is made on the applicability of the expectation hypothesis (EH) to different parts of the term structure of SHIBOR, indicating that EH is not applicable to the whole yield curve of SHIBOR, but works on the short and long parts respectively. Thus, VEC models are established to capture the dynamics of the short and long interest rate systems respectively, finding that the effect of the monetary policy tends to decline along the term structure of SHIBOR and the overnight rate displays an inclination to deviate from the long run equilibrium