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China working on more reforms- Central Bank
November 27, 2013, 9:42 am

Financial institutions can decide their own rates following commercial principles [Xinhua]

China will allow private firms to form small and medium financial institutions [Xinhua]

In an attempt to strengthen the Chinese economy, the government will adopt market-based deposit rates and capital account convertibility, Central Bank Governor Zhou Xiaochuan said on Tuesday.

Zhou said the Asian nation is the first country to recover from the global financial crisis because of the government’s timely measures.

“The Chinese government is emphasising reforms to boost the vitality of the market and maintain stable economic growth,” said the governor.

The monetary authorities have accelerated the process of building a pricing and quoting system that will help liberalise interest rates, especially deposit rates, he said.

Thorough interest rate liberalisation will be realised in the “mid-term,” Zhou said, without giving a proper time frame.

He also reiterated that capital account convertibility will be accelerated “based on the results of these reforms” to cut companies’ financial transaction costs for trade and investment.

Other reforms include setting up a negative-list system as well as raising the cross-border investment quotas, which will be scrapped “when the time is ripe.”

China will also allow private firms to form small and medium financial institutions.

In a newly published book, Zhou said the nation’s central bank, intends to further widen the yuan’s daily trading band as it boosts the currency’s convertibility.

“China will speed up the process for the yuan to become fully convertible and strengthen supervision on hot money,” Zhou wrote.

Source: Agencies