Make me your Homepage
left corner left corner
China Daily Website

Deposit rate controls should be lifted

Updated: 2013-07-26 20:54

A recent regulation issued by the People's Bank of China canceled State controls over interest on loans. An editorial in the Southern Weekly advocates removing the control over interest on deposits as well (excerpts below).

The planned economy wasn't built in a day, and it will also take a long time to demolish it. Twenty years after the State started the "marketization" reform of interest rates, the State control over loan interest rates has finally been removed by a recent PBOC regulation.

However, deposit interest rates are still under State control. Neither the new regulation nor other statements by the PBOC mentioned its reform.

Actually, as the loan interest rates are pushed higher by market demand, the competition for deposits will also be fiercer. If regulators insist on controlling the deposit rates, the market will react in its own way.

For example, at the end of every year, bank staff members are always trying to attract huge deposits with abnormally high interest rates. Another example is the financial products that are popular in banks, the converted annual interest rates of which are as high as 8 to 9 percent; both are results of controlled deposit rates, which are much lower than loan rates.

Further, the flourishing of private loans in some provinces also revealed the problems of controlling deposit rates. It's time to lift the control for a true market economy.