SHANGHAI, Feb 26 (Reuters) - China will completely liberalise interest rates offered on smaller foreign currency accounts in the Shanghai free trade zone (FTZ), the central bank said on Wednesday.
The People’s Bank of China (PBOC) will abolish the upper limits on deposit rates offered by banks on foreign exchange accounts holding below $3 million as from March 1, the central bank’s Shanghai headquarters said in a statement published on its website, shanghai.pbc.gov.cn.
The reform will primarily benefit smaller customers in the zone, as lending rates and deposit rates on accounts holding more than $3 million have been liberalised throughout China since 2000.
China launched the Shanghai FTZ in September 2013 to help experiment with economic reforms, in particular financial innovation, hoping successful experiments there could eventually be duplicated throughout the country.
However, the FTZ has so far proven a disappointment to those who expected quick, radical change. Few multinationals have relocated to the zone given its distance from Shanghai’s central business district, the FTZ’s stratospheric rents thanks to rampant speculation and uncertainty over which reforms will be rolled out when.
The cautious nature of this latest reform highlights regulatory caution over the major steps authorities have promised to enact in the zone, namely testing the full convertibility of the yuan and liberalising rates on yuan-denominated deposits. The latter is seen as the crucial lever for restructuring China’s financial system.
Reporting by Lu Jianxin and Pete Sweeney; Editing by Richard Borsuk