CHINA'S state and commercial banks can now raise short-term funds for up to 120 days in a national interbank lending market launched in Shanghai yesterday.
Analysts said the new market - carried out via the China Foreign Exchange Centre's system - signalled a major move by the People's Bank of China to develop free market tools to influence money supply.
The central bank now relies mainly on inefficient administrative credit quotas to control money supply to slow down inflation and economic growth.
Shanghai Society of Finance and Banking consultant Sheng Mujie said: 'When the interbank market becomes more developed, the central bank would be able to exert better control of the country's money supply.' By yesterday's launch, 15 of the 35 interbank lending centres had been hooked up to the national electronic system. The rest would be linked in phases.
In addition, 12 of the country's 17 state and commercial banks have been approved as primary dealers in the market, which offers funds of up to seven days, 20 days, 30 days, 60 days, 90 days and 120 days.
In the first morning of trade, 15 deals worth 780 million yuan (about HK$724.8 million) were made. The first transaction - for 50 million yuan of up to 60 days - was done between China Everbright Bank and Citic Bank at an interest rate of 1.038 per cent.
