The Chinese Central Bank Is Nearly Done Freeing Up Rates. Now Comes the Hard Part
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People’s Bank of China Governor Zhou Xiaochuan has been pursuing a market-based interest-rate system for over a decade. He’s almost done. Now comes the hard part.
From overnight interbank borrowing to long-term bank lending rates, there are no longer restrictions on the price of money in China. The remaining regulatory sanction that banks can’t offer savers rates more than 150 percent of benchmark deposit levels will be lifted by the end of 2015, according to the timetable made public by Zhou himself.
So the rules are now largely in place for credit to flow through the economy based on potential returns. That’s a sharp contrast to the days when Zhou took over the central bank in 2002 when Alan Greenspan was Federal Reserve Chairman and the price and flow of money in China was largely decided by the PBOC. The task now is to translate the new rules to reality…
The Chinese Central Bank Is Nearly Done Freeing Up Rates. Now Comes the Hard Part
