China's central bank will start to issue benchmark interest rate daily from
January 1 next year to give more play to the market force in rate setting, said
an official with the bank Sunday.
The benchmark interest rate will be based on the quotations for various
inter-bank lending and borrowing rates at different maturities offered daily by
16 commercial banks with good credit, said Wu Xiaoling, deputy governor of the
People's Bank of China.
The move aims to bring the force of prices into play in adjusting the
country's financial markets, said Wu.
The central bank has been controlling deposit and loan rates as a result of
weak regulation in current financial markets, said wu.
The control has ensured stable operation of commercial banks but cut off the
connection between the monetary market and the interest rates, said Wu.
As China will fulfill its commitment to the World Trade Organization to fully
open up its banking sector by the end of the year, domestic financial
institutions have to improve their competitive edges to face the challenges from
foreign rivals, Wu noted.
The central bank has been experimenting with the inter-bank offered rate
quotation in Shanghai since Oct. 8.
Wu said that the central bank will promote the marketization of interest
rates actively and prudently, by gradually easing limits on benchmark deposit
and loan rates and making the interest rate mechanism more flexible.