A new system for interbank lending

By Xin Zhiming (China Daily)
Updated: 2007-01-04 09:18

Analysts said the Shibor is expected to help develop derivatives products, such as interest rate swaps, which require support from benchmark rates of longer and more flexible terms.

Currently there are only two major reference rates in the market: The seven-day weighted average interest rate for repurchasing treasury bonds and the rate for one-year central bank bills.

The Shibor will also provide a sound market platform for the central bank's maneuvers in the money market, according to Fu Yong, a researcher at the China Center for Economic Studies, Fudan University.

The new benchmarks will provide a sound "barometer" for judging the reasonability of liquidity in China's money market, Ha Jiming, chief economist of the China International Capital Corporation, was quoted by the China Securities Journal as saying.

Ha suggested that the central bank should strengthen the importance of the Shibor so dealers would accept it.


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