The file photo shows Yi Gang, vice-governor of China Central Bank. [Photo: youth.cn]

The vice-governor of China's central bank has confirmed authorities are looking at the idea of a so-called "corridor system" to manage interest rates.

A "corridor system" would set rates at the top-end of what domestic banks would prefer to set on a daily basis, while setting the low-end of the target rate would be capped at what the market is asking for on bond rates.

This would allow authorities to become more flexible in setting interest rates.

Speaking on the sidelines of the two sessions in Beijing, Yi Gang says while the adoption of "corridor system" is being looked at, it remains a concept at this point.

"Right now in China we not able to create a full-blown "corridor system." This is because our current mechanisms need to balance the realities of the value of our currency with what we would like the renminbi to be at. We all know that interest rates act as a price target, but our mechanism needs to consider the quantity targets of our monetary policy."

In making the statement, Yi Gang says the exchange rate of renminbi is going to remain stable, and at a reasonable level.

"Medium to high growth is going to be maintained in China. This isn't going to change. National productivity and demand is still on the rise. On top of this, we still have a significant current account surplus, especially on the trade side. Chinese foreign direct investment and overseas direct investment are increasing steadily. Beyond this, let's not forget that we still have a massive foreign reserve fund here in China."

Despite Chinese foreign reserves declining last year, China still maintains the largest forex holdings in the world at around 3.2-trillion US dollars.