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1st LD-Writethru: Possibility of full interest rate liberalization "very high" this year

Xinhua, March 12, 2015 Adjust font size:

Chinese central bank governor Zhou Xiaochuan said Thursday that the possibility for China to fully liberalize its interest rates mechanism is "very high" this year.

China has many accomplishments in liberalizing its interest rates over the past years, and it is "a reasonable prediction" that China is very close to the last step of fully liberalizing interest rates, namely scrapping the upper limit of the deposit rates, Zhou told reporters.

In another step towards liberalizing the interest rates mechanism, China's central bank last month decided to adjust the upper limit of the floating band of deposit rates to 1.3 times the benchmark from the previous 1.2 times.

The central bank in November 2014 lifted the upper limit of the floating band of deposit rates to 1.2 times the benchmark from the 1.1 times announced in June 2012, a big step in interest rate reform. Until June 2012, China's commercial banks were generally not allowed to offer deposits rates higher than the benchmark.

The central bank in July 2013 announced to cancel the floor limit for lending interest rates, and commercial banks can decide their own rates following commercial principles, a big step of interest rate liberalization. The ceiling on deposit rates was still retained.

"If there is a chance this year, the ceiling on deposit rates can be canceled, and the widely-expected 'last step' will be achieved. The possibility should be very high," Zhou said at a press conference on the sidelines of the national legislature's annual session.

After lifting the upper limit of the floating band of deposit rates to 1.3 times the benchmark, commercial banks adopted a differentiation pricing strategy and China's interest rate mechanism "is heading in an increasingly more market-oriented direction," said central bank vice governor Yi Gang. Endi