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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: RealMuLan who wrote (26056)3/21/2005 10:05:29 AM
From: mishedlo  Read Replies (1) of 116555
 
China interest rate reform aims to let banks decide rate spread -
Monday, March 21, 2005 7:08:45 AM
afxpress.com

(updating with more details, background)
BEIJING (AFX) - The People's Bank of China (PBoC), the central bank, said the country's interest rate reform program is aimed at giving commercial banks the freedom to decide their own interest rate spread

In a statement on its website, Wu Xiaoling, central bank deputy governor, says the PBoC will modify the benchmark interest rate after it has moved ahead with broader interest rate reform

The central bank has already given commercial banks limited freedom in setting lending rates, but deposit rates continue to be set by the central bank

Wu said China's current treasury-bonds structure is not good enough to provide a benchmark interest rate for the market and the central bank will reform treasury bonds issue to provide such benchmark rate

Last October, the central bank raised both benchmark one-year deposit and lending interest rates by 27 basis points on back of inflation pressure, its first rate hike in more than a nine-year period

In today's statement, Wu also urged commercial banks to get more sensitive to macro-economic policy changes to prevent financial risks when granting loans

Wu said the central bank will use various monetary tools to maintain a stable credit growth this year
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