China's central bank will start to issue a daily benchmark
interest rate from January 1 to give more play to market forces 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, added Wu.
The control has ensured stable operation of commercial banks but
cut off the connection between the monetary market and interest
rates, said Wu.
As China will meet 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 edge 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 October 8.
Wu said the central bank will promote the marketing of interest
rates actively and prudently by gradually easing limits on
benchmark deposits and loan rates and making the interest rate
mechanism more flexible.
(Xinhua News Agency December 11, 2006)