China widens interest rate range
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China's central bank is cutting the interest rate it pays on excess bank reserves.
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BEIJING, China -- The central People's Bank of China is to widen the floating range for lending rates in its latest move towards a market-orientated interest rate regime, the state-run Xinhua news agency reports.
From January 1, the upper limit of the lending rate range by commercial banks and urban credit co-operatives will rise to 1.7 times the benchmark rate set by the PBOC, while that by rural credit co-operatives will move up to 2 times that of the central bank's rates.
The bank will also cut the interest rate it pays on excess bank reserves by 0.27 percentage points to 1.62 per cent from December 21, in an effort to "encourage financial institutions to improve the efficiency in fund utilization.''
A broader floating range for interest rates on loans will "help the development of small and medium-sized enterprises and improve employment, help propel the reform of financial institutions, and is conducive to containing usury,'' the bank said in statement Wednesday.
Rapid loan increases this year have fuelled inflationary concerns, prompting the central bank in September to raise the bank reserve ratio by 1 percentage point to 7 percent of total deposits.
