Free interest rates for full market economy
Print Edition
CHINA should quicken interest rate liberalization to lead to a full market economy and avoid misallocation of financial resources, top financial experts said at the Lujiazui Forum yesterday.
“The benefits of interest rate reform and liberalization are underestimated while the risks are overestimated,” said Zhou Qiren, professor with the National School of Development at Peking University.
“Interest rates should free up as soon as possible to improve the efficiency of market capital to boost the real economy.”
China has taken strong steps to liberalize interest rates, including a move in July 2013 to scrap the floor limit for bank lending rates, as well as issuing a guideline for launching negotiable deposit certificates on the interbank market.
Other topics discussed at the forum included further relaxation in the loan market, building a vibrant bond market, and further opening up of capital accounts.
On Wednesday, the State Council, or China’s Cabinet, said the preliminary draft of a new banking law abolishes the 75 percent cap on banks’ loan-to-deposit ratios that for years has limited how much banks could lend. This shows the determination of Chinese authorities to drive monetary policies and banking regulations closer to global practices.
But experts urged further action on a better financial structure to accelerate the reform.
“Without a healthy interest rate system to transfer capital liquidity to the real economy, the predicament for companies which want to raise funds won’t be eased,” Li Yang, former vice president with Chinese Academy of Social Sciences, said.
Sun Jie, executive vice president at the China Foreign Exchange Trade System and National Interbank Funding Center, said the interest rate reform is coming to the last mile.
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