China central bank says it will improve benchmark interest rate system

FILE PHOTO: The headquarters of the People's Bank of China, the central bank, is pictured in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. REUTERS/Jason Lee

BEIJING/SHANGHAI (Reuters) - China’s central bank said on Monday it will make interbank repo rates by depository institutions (DR) a key reference for monetary policy adjustment and financial market price-setting.

Improving China’s benchmark interest rate system would help build up financial markets, deepen market-based interest rate reforms and improve monetary policy management, the People’s Bank of China said in a statement on its website.

It added that it had participated in international benchmark interest rate reforms and will promote the application of new benchmark interest rates with a focus on depository institutions.

PBOC said the development priority of China’s interbank benchmark interest rate system was to promote the wide application of various benchmark interest rates.

Efforts would be made to innovate and broaden the application of DR in financial products to make DR a key reference indicator for China’s monetary policy management and financial market pricing, it added.

PBOC said China had a first-mover advantage in cultivating benchmark interest rates based on actual transactions, and significant progress has been made in the construction of China’s benchmark interest rate system.

The central bank said China’s benchmark interest rates based on actual transactions have been in operation for a long time, and that full-scale market transaction data was available and transparent.

China’s money, bond, and loan markets have cultivated their own representative interest rate indicators, PBOC said, adding that DR, government bond yield, and Loan Prime Rate (LPR) have played a significant role as benchmark interest rates in the corresponding financial market.

Reporting by Lusha Zhang and Kevin Yao in Beijing; additional reporting by Luoyan Liu in Shanghai; Editing by Toby Chopra and Andrew Heavens