China unlikely to ease controls on interest rates soon
Concrete reforms needed before the central bank can further relax controls, say sources
Beijing took a small step towards liberalising its interest-rate regime in June, but the central bank is quietly signalling that further concrete steps will not be taken any time soon.
According to people familiar with the thinking at the People's Bank of China, certain structural and institutional reforms must be put in place before lending and deposit interest rates, currently strictly set by the central bank, can be relaxed. And that could be several years away.
Among the pre-conditions is the creation of a national deposit insurance system to protect depositors.
Earlier this month, the central bank invited a select group of bankers and analysts to a closed-door seminar in Beijing, where they discussed the outlook for the mainland's economy as well as the next phase of financial reforms, said the people, who asked not to be named because of the sensitive nature of the matter.
Also earlier this month, the PBOC unveiled a vague blueprint for overhauling the financial sector by 2015, a sign it is determined to proceed.
However, at the closed-door meeting, several senior central bank officials struck a cautious tone regarding the timing of making interest rates more flexible and told the participants that the central bank did not yet have a specific strategy mapped to further liberalise the interest-rate regime, the people said.