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BEIJING, Feb 15 (Reuters) - 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 revenues.
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 emerge. (Reporting by Zhou Xin and Simon Rabinovitch; Editing by Ken Wills)