China has taken another step in liberalising its financial sector by loosening its grip on interest rates.
The central bank has said it will allow banks to trade deposits with each other from Monday, using a financial product called certificates of deposit.
The interest rate on the certificates will be determined by the market, unlike ordinary deposits, which are subject to rate caps in China.
The move is also likely to help improve cash circulation in interbank market.
In June, the overnight lending rate between banks jumped to exceed 25% at one point as banks became reluctant to lend to each other amid a cash crunch, before falling in subsequent days.
China’s state-owned Xinhua news agency said the latest move “will allow banks to borrow at more stable costs in the interbank market”.
The minimum amount for an individual certificate of deposit will have to be 50m yuan ($8.2m; £5m) and banks will also have to inform the central bank in advance about how much they plan to issue in a year.
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