BEIJING, Feb. 21 (Xinhuanet) -- China's central bank on Tuesday said China will improve the interest rate formation mechanism by developing a market benchmark system in order to increase the bank's ability to influence market interest rates.

    Two of the major monetary policies for 2006 are to gradually promote market-oriented interest rate reform and improve the formation mechanism of interest rates, the bank's report said.

    It will also simplify the terms and varieties of benchmark interest rates for loans, continue market-oriented reform of interest rates for long-term and lump sum deposits, and offer derivatives of interest rates after careful research.

    The central bank said it plans to upgrade the interest rate pricing capability of commercial banks and rural credit cooperatives.

    The bank said the value of the Chinese yuan will remain at a reasonable and balanced level.

    It pledged to upgrade the floating exchange rate system to cater to the need of China's economic development and financial stability, in an "independent, controllable and progressive" way. Enditem