China formally announced a thorough decontrol over lending rates of financial institutions on July 20.
Approved by the State Council, the Chinese cabinet, the People's Bank of China (PBOC), the central bank, said on July 20 that the control over lending rates of financial institutions in the market would be lifted. In detail, a minimum of 0.7 times lending rates of them would be canceled. And lending rates of them would be fixed by themselves in accordance with concerned commercial principles.
The announcement has drawn rising attention of the public since it was unveiled and in line with industry observers, this is a further move the nation takes to boost an interest rate marketization reform and indicates that the Chinese government determined to continue the reform. Zhang Qizuo, vice chairman of the China International Economic Research Institute, said that he expected to see next step of the reform. Sun Lijian, a professor with Fudan University, pointed out that this was a start of a new round of financial reform triggered by the nation and the features of related economic policies would include marketization and decontrol. Huang Yiping, a professor with Peking University, said that this signaled that new leaders of the nation would continue the reform.
Netizen believe that the domestic economy is experiencing a slowdown, thus it is quite brave for the central government to make such a decision at this time. Foreign medium think highly of the move, too and in their opinion, this indicates that the Chinese government is determined to boost the financial reform. Actually, almost all industry observers think that this will help firms, especially those small- and medium-sized ones, in the market reduce cost. In addition, fundamental functions of the market in resource allocation will be strengthened. In one word, the move will do good to a stable and health growth of the domestic economy.
Lian Ping, chief economist with BoCom, the fifth-biggest commercial lender in the market, stressed that real economy would benefit from this and financial institutions there would attach more importance to providing support to small- and medium-sized firms. This would help them not only reduce financing cost and but also fuel expansion and shift business mode. Top executives of ICBC, the biggest commercial lender in the market, and BOC, the biggest foreign exchange lender there, pointed out that the move would deliver a strong impact on the domestic banking system and commercial lenders there would see operation mode be different in the future.