Central bank advisor: China may use floating rate for deposits

10:27, August 30, 2010      

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Under the pressure of CPI growth, China may consider adopting a floating interest rate on deposits, said Xia Bin, a member of the monetary policy committee of the People's Bank of China, on Aug. 28.

He suggested that the government speed up reforms in areas including taxation, although China's economic restructuring and the formation of a new growth engine will take time.

As the commercial banks have already raised interest rates covertly to attract depositors, it will be better to launch the floating rate mechanism for deposits and let the capital prices reveal capital movement, Xia said.

He also reiterated that there will be a credit expansion limit of 7.5 trillion yuan in 2010.

"From 2004 to 2008, when China witnessed low inflation and high growth, the average annual growth rate of new bank loans was nearly 14 percent, and the country's GDP recorded 2-digit growth," Xia said. "The credit limit of 7.5 trillion yuan is equal to a credit growth of 18.8 percent. Supposing that China's GDP growth is 9 percent, the target is not tight."

By Qi Shuwen, People's Daily Online


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