BEIJING, July 10 (Xinhua) -- China's central bank governor Zhou Xiaochuan reiterated on Thursday that China is likely to have fully liberalized interest rates within two years, but the timetable will depend on economic circumstances at home and abroad.
"The timetable to liberalize interest rates will be mostly carried out according to conditions of the domestic economy and global economy, but we believe it could be realized within two years," Zhou told a press conference at the ongoing China-U.S. Strategic and Economic Dialogue.
In March, Zhou said at China's annual legislative session that the country is very likely to ease its grip on banks' deposit rate, the last and most important step of interest rate liberalization, in the coming one or two years.
At Thursday's press conference, Zhou said the Chinese leadership has stressed "a sense of urgency in reform" and the People's Bank of China is preparing accordingly.
After the interest rate is freed up, the central bank will have its policy rate play a guiding role in the market via mechanisms on the monetary market, said Zhou, adding that the bank is preparing two or three sets of such tools.
China has taken incremental steps toward interest rate liberalization, including a central bank decision last July to scrap the floor limit for bank lending rates, and a guideline in December for piloting negotiable deposit certificates on the interbank market.
As for forex reform, Zhou said the central bank will "significantly cut intervention on the forex market" if targets for forex reform are realized step by step and when the right conditions are in place.
The international forex market will see some abnormal fluctuations as major countries adjust their currency policies, said Zhou. As a result, China has to be discreet about the spillover effect, he noted.
Data showed the Chinese currency, the yuan, had appreciated by more than 12 percent by January this year after the central bank deepened reforms to the yuan's exchange rate formation mechanism back in June 2010. However, the currency headed toward months of depreciation against the U.S. dollar after the central parity rate of the yuan hit a new high against the dollar on Jan. 13 at 6.095.
Analysts have forecast that greater two-way fluctuations of the yuan may become a normal trend in the future.
"If the market fluctuates too much resulting from short-term opportunistic forces, we will make moves; and if the market is stable, we could speed up the reform a little bit," Zhou said.
Xinhua Insight: Deliberation before liberalization: China's interest rate conundrum
BEIJING, April 5 (Xinhua) -- As China prepares to liberalize interest rates, the experiences of the United States and other countries may offer some timely lessons.
Commercial banks in China offer a maximum of 3.3 percent on one-year deposits. The People's Bank of China's (PBoC) benchmark deposit rate stands at 3 percent, and banks can offer up to 10 percent more than the benchmark. This means that the real market rate from commercial banks is currently around 3.3 percent. This practice is similar to Regulation Q in the United States before it was abolished in 1986. Full story
PBoC frees up Shanghai foreign deposit rate
SHANGHAI, June 27 (Xinhua) - China's central bank removed the cap on interest rates for foreign currency deposits in Shanghai banks on Friday, expanding a pilot from the Shanghai free trade zone (FTZ).
A statement by the Shanghai office of the People's Bank of China said interest on corporate foreign currency deposits of less than 3 million U.S. dollars will no longer be subject to a ceiling. Full story