BEIJING Feb 15 China has launched a pilot
programme allowing some banks to set deposit rates of their
choosing, another step forward in interest rate liberalisation,
the China Daily reported on Tuesday, citing sources.
China Merchants Bank (600036.SS) and a few city commercial
banks that have been included in the scheme will be allowed to
compete for large deposits from corporate clients in a "price
bidding" system, the newspaper said.
China currently sets a ceiling on deposit rates and a floor
on lending rates, with a roughly 3 percentage point gap between
them, a spread that is the source of a large chunk of bank
The one exception is that China allows banks to fix rates
with clients for large deposits locked up for more than five
years. China Daily said the latest trial would cover deposits
with maturities of less than five years.
The People's Bank of China has long pledged to move to a more
market-based system for setting rates in order to foster
competition between banks.
Zhou Xiaochuan, China's central bank governor, said late last
year that there would be "noticeable progress" in interest rate
liberalisation in the coming years. [ID:nTOE6BG01W]
The central bank appears to be proceeding cautiously,
conducting the deposit rate trial at a few small lenders with
fewer clients to gauge the impact and see whether any problems
(Reporting by Zhou Xin and Simon Rabinovitch; Editing by Ken