China to make interest rates more market oriented

November 4, 2015 11:59 AM (UTC+8)

 

China said it plans to make interest rates more market-oriented, enabling the financial sector to better serve the economy, state news agency Xinhua said in an official statement Wednesday.

Released after an executive meeting of the State Council, China’s cabinet, presided over by Premier Li Keqiang, the statement said the new, improved interest rate formation and adjustment mechanisms must suit market demand. It also said China should enhance supervision of financial institutions to ensure fair play and risk management.

The benchmark deposit and lending rates will continue to be used as reference and guidance tools. To prevent irrational pricing of interest rates, the government will enhance supervision and continue to set different reserve requirement ratios for different institutions.

All of which leads Asia Unhedged to ask, “What the heck have they been doing up until now?” Pretty much bouncing from one crisis to the next in a haphazard way, like a ball in a pinball machine.

Well, if they really mean it, Asia Unhedged has some suggestions, lower the interest rates some more, much like we’ve been advocating over the past several months. This should get the economy moving enough to get that 7% growth everyone so desperately wants.

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