Thu, Mar 28, 2013 - Page 14 News List

Beijing signals looser state control of interest rates

Bloomberg

Beijing signaled that it will take steps this year to loosen state control over interest rates and the yuan as Chinese Premier Li Keqiang (李克強) seeks to open up the economy to sustain growth.

Authorities “will roll out new measures in promoting interest-rate and exchange-rate liberalization, as well as in developing a multilevel capital market,” the State Council said in a statement yesterday following a meeting led by Li on issues for the government to focus on this year. Previously officials had been less specific on a timeframe for the changes.

Potential shifts include measures that would let the yuan be more freely traded, boost returns for savers and increase competition among lenders. A majority of analysts surveyed by Bloomberg News forecast that China would widen the daily trading limit for the yuan, and relax or remove the cap on deposit rates or the floor on lending rates this year.

“What is different from before is the call for concrete moves of reforms in 2013,” said Yao Wei (姚煒), China economist at Societe Generale SA in Hong Kong, who forecasts the nation will raise the ceiling on deposit rates, remove the floor on lending rates and widen the yuan’s trading band.

The government was not more specific on the types of changes to interest-rate and exchange-rate policy. However, the language compares with then-Chinese premier Wen Jiabao’s (溫家寶) annual report to lawmakers on March 5 that said China “should steadily carry out reforms” to make interest rates and the exchange rate “more market-based.”

The State Council said: “China will actively push forward reforms in important sectors and try to make substantial progress.”

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