UPDATE 1-China to deepen interest rate, yuan reforms-Wen

Mon Jan 21, 2013 7:02am EST

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* China Premier Wen reiterates interest rate, yuan reforms

* Says to quicken development of private financial firms (Adds more quotes and background)

BEIJING Jan 21 (Reuters) - China will push forward market-based reforms on interest rate systems as well as on the currency regime, state radio quoted outgoing Premier Wen Jiabao as saying on Monday.

Wen's remarks, which reaffirmed the official stance, came after the central bank launched a new short-term liquidity tool in its open market operations, which analysts say could help its gradual move towards a market-based interest rate regime.

"We will steadily push forward market-based liberalisation of interest rate and improve the renminbi (yuan) exchange rate formation mechanism, while expanding the international use of of renminbi to gradually realise capital account convertibility of the currency," Wen was quoted as saying during a visit to the central bank.

Wen also pointed to the challenges faced by China's financial sector and called for the prevention of financial risks to maintain stability.

Wen's remarks followed a promise by the central bank to quicken the pace of reforming and opening up the financial sector this year, while preventing systemic risks.

Beijing will also quicken the development of private financial institutions and deepen market-based innovations to build up a modern financial system.

China's central bank announced last Friday it would launch a new short-term liquidity tool and permit 12 primary dealers to bid for bond repurchase agreements. Traders would be allowed to bid on a daily basis.

The central bank has been gradually liberalising bank lending and deposit rates in recent years.

It has pledged to keep its "prudent" monetary policy this year while maintaining appropriate credit growth. (Reporting by Aileen Wang and Kevin Yao; Editing by Simon Cameron-Moore and Ron Popeski)

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