Shibor replaces scarcely used interbank guide in a key step towards liberalisation
The central bank today begins publishing a new benchmark rate for borrowing between banks in an important step towards liberalising interest rates, encouraging more financial derivatives and allowing the yuan to float freely.
The Shanghai interbank offered rate (Shibor) is based on the interest rates offered by 16 commercial banks in the interbank market for periods ranging from overnight to one year and is expected to replace the largely ignored China interbank offered rate (Chibor).
'Shibor is going to be more actively traded and a better indicator of actual liquidity conditions than Chibor and will provide not only the market but the central bank itself with better tools,' Royal Bank of Scotland economist Ben Simpfendorfer said.
A central bank spokesman yesterday refused to identify the 16 banks but said they included institutions acting as market makers and with relatively good public reporting standards.
They almost certainly include the Big Four state-owned commercial banks - Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China - and six smaller banks, three city commercial banks and possibly three foreign banks.
Last month, People's Bank of China vice-governor Wu Xiaoling reiterated the central bank's intention to move away from the current system of setting deposit and lending interest rates to a system where they are set by the market.