China Reforms Bank Lending Gives Rate Setting Freedom

China’s central bank announced long-awaited interest rate reforms on Friday, removing controls on the rates banks may charge clients for loans, in a step towards more market-driven pricing of credit.

The People’s Bank of China (PBOC) said in a statement on its website that it was removing its floor on lending rates for commercial banks, meaning that banks will now be able to cut rates as much as they see fit to attract borrowers.

The central bank said it hoped the move will lower financial costs for companies.

However, it did not scrap an existing ceiling on deposit rates, currently set at 110 percent of benchmark rates, which many economists see as the most important step Beijing will eventually need to take in liberalizing its interest rate regime.

via CNBC

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