LINE

Text:AAAPrint
Economy

Interest rate liberalization in last mile

1
2015-06-04 09:28Xinhua Editor: Gu Liping

After a series of reforms, China's decades-long endeavor to free up the interest rates is finally reaching the last mile.

On Tuesday, China's central bank issued a regulation for financial institutions to issue large-denomination certificates of deposit, known as CDs, to individuals and companies, which analysts hail as a key step forward towards the full liberalization of interest rates.

The certificates are tradable deposit agreements that allow lenders to bypass the interest rate controls. Currently, China has removed its grip on lending rates, but the ceiling on deposit rates is still retained at 1.5 times the benchmark.

"The introduction of the CDs is a milestone in pushing China's interest rate reform through the last mile," Deng Haiqing, an analyst with CITIC Securities, said.

MARKET IMPACT

The participation threshold for purchasing a CD is set at 300,000 yuan (about 48,860 U.S. dollars) for individual investors and 10 million yuan for institutions, according to the central bank.

Interest on the certificates will be mainly determined by the market. Banks and investors can set a fixed or a floating rate, using the Shanghai Interbank Offered Rate (Shibor) as a benchmark.

Shibor, which measures costs of interbank borrowing that is not under state control, stood at 3.191 percent for six-month loans and 3.4080 percent for one-year loans on Wednesday.

The current interest rates for six-month and one-year ordinary deposits cannot exceed 3.075 percent and 3.375 percent, respectively.

With higher returns and less risks due to the deposit insurance system already in place, the CD scheme is expected to offer banks new channels to lure deposits at a time when they are under vehement attack from other wealth management products and a booming stock market.

Central bank data showed outstanding yuan deposits stood at 125.76 trillion yuan as of the end of April, up 9.7 percent year on year. The growth slowed 4.6 percentage points from a year earlier.

Lou Lili, general manager of the strategy and innovation department under Evergrowing Bank, a Chinese joint-stock commercial bank, said the certificates of deposit tailored to investors will further enrich investment options in China's financial market.

Related news

MorePhoto

Most popular in 24h

MoreTop news

MoreVideo

News
Politics
Business
Society
Culture
Military
Sci-tech
Entertainment
Sports
Odd
Features
Biz
Economy
Travel
Travel News
Travel Types
Events
Food
Hotel
Bar & Club
Architecture
Gallery
Photo
CNS Photo
Video
Video
Learning Chinese
Learn About China
Social Chinese
Business Chinese
Buzz Words
Bilingual
Resources
ECNS Wire
Special Coverage
Infographics
Voices
LINE
Back to top Links | About Us | Jobs | Contact Us | Privacy Policy
Copyright ©1999-2018 Chinanews.com. All rights reserved.
Reproduction in whole or in part without permission is prohibited.