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China Considers Relaxing Controls on Interest Rates
China should actively pursue the goal of adopting interest rates set by market forces rather than by the government, Director General of the Monetary Policy Committee of the People's Bank of China Xie Ping said on May 16. The head of the Chinese central bank's think-tank told the China Financial Industry Reforms International Summit 2000 that the country should lift controls on currency market rates first, then lending rates, and finally deposit rates.
However, he did not give any specific timetable for achieving these goals.
He said that China's currency policy should take interest rates as intermediary objective and inflation rates as the final goal. China has already relaxed controls on the prices of almost all commodities and services in a bid to build a market economy, but has yet to lift control on interest rates. Interest rates for loans and bank deposits are now set by the central bank rather than by supply and demand.
Xie said that China should reform the currency market by establishing a unified and flexible market with high efficiency and handling capacity.
New channels through which the central bank handles base currency will be explored for the purpose of enhancing financial liquidity, according to Xie.
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