A market-oriented way of financial reform

It has been more than 20 years since China started interest rate liberalization reform. Interest rate liberalization, one of the most important contents of the nation's economic restructuring reforms, started in 1996 when the central bank freed the Shanghai Interbank Offered Rate.

It achieved major progress from 2003 to 2004 but then slowed afterwards as the monetary policy had to focus on curbing the excessive liquidity from the fast-booming foreign exchange reserves. Since 2012, interest rate liberalization has accelerated again, and now the central bank's control has been almost removed.

The key to raising the efficiency of resource allocation is to let the market decide the price of production factors, including the price of financing or capital. The price mechanism will allocate social funds to the most effective sectors of the national economy, which will benefit the country's overall economic development and help improve people's living standards.