PBOC Official: China May Free up Bank Deposit Rates Soon

China’s central bank is likely to remove the ceiling on bank deposit rates soon, instead of raising the cap again, Sheng Songcheng, head of the statistics department at the People’s Bank of China, was quoted on Thursday as saying.  Some analysts expect the central bank to free up deposit rates when it next cuts interest rates.

The move would mark a landmark reform towards allowing market forces to determine the cost of credit to help rebalance the world’s second-largest economy.  “I believe removal of the ceiling on deposit rates is not far off,” the China Business News quoted Sheng as saying.

Sheng suggested that the authorities should do away with the cap on bank deposit rates “when time is appropriate”, saying that it would be meaningless to increase the ceiling again.  When the central bank cut interest rates in May – the third such move since November, it lifted the ceiling for deposit rates to 1.5 times the benchmark.