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China to Lift Control over Foreign Currency Lending Rate
China's central bank will lift control over lending rates of foreign currency loans which are to be issued by the country's four main State-owned commercial banks, according to Wednesday's Chinadaily.
The measure will enable the commercial banks to issue foreign currency loans by the same rates with their overseas counterparts. China has allowed more than a dozen of foreign banks to conduct foreign currency and Renminbi businesses in Shanghai and Shenzhen.
The move is the first step the People's Bank of China (PBOC) will take to gradually phase in a market-oriented bank interest rate system within three years, said Dai Genyou, head of PBOC's Monetary Policy Department, at a seminar held in Beijing recently.
Though the central bank has allowed the commercial banks to issue loans at a rate not 10 per cent higher or lower than a benchmark set by PBOC, stern control remains on deposit rates.
The reform of China's bank rate system will begin with foreign currencies and lending rates, and gradually move to Renminbi currency and deposit interest rates, Dai said.
To prevent any market fluctuations from happening in the cities, the central bank will experiment the reform first in the coutryside, he said.
According to Dai Xianglong, Governor of PBOC, China is expected to complete the interest rate reform within the coming three years.
At present, lending rates of loans issued by the commercial banks to large-sized enterprises can fluctuate 10 per cent higher than the central bank's benchmark, while interest rates of loans to small- and medium-sized enterprises can enjoy fluctuation limit of 30 per cent higher than the benchmark interest rate.
The interest rate of one-year Renminbi deposit in China's commercial banks is 2.25 per cent, and one-year loan rate is 5.85 per cent.
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