China's central bank governor Zhou Xiaochuan reiterated on Thursday that China is likely to have fully liberalised interest rates within two years, but the timetable will depend on economic circumstances at home and abroad.
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In March, Zhou said at China's annual legislative session that the country is very likely to ease its grip on banks' deposit rate, the last and most important step of interest rate liberalization, in the coming one or two years.
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At Thursday's press conference, Zhou said the Chinese leadership has stressed "a sense of urgency in reform" and the People's Bank of China is preparing accordingly.
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After the interest rate is freed up, the central bank will have its policy rate play a guiding role in the market via mechanisms on the monetary market, said Zhou, adding that the bank is preparing two or three sets of such tools.
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China has taken incremental steps toward interest rate liberalization, including a central bank decision last July to scrap the floor limit for bank lending rates, and a guideline in December for piloting negotiable deposit certificates on the interbank market.
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As for forex reform, Zhou said the central bank will "significantly cut intervention on the forex market" if targets for forex reform are realized step by step and when the right conditions are in place.
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The international forex market will see some abnormal fluctuations as major countries adjust their currency policies, said Zhou. As a result, China has to be discreet about the spillover effect, he noted.
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Data showed the Chinese currency, the Renminbi, had appreciated by more than 12 percent by January this year after the central bank deepened reforms to the Renminbi 's exchange rate formation mechanism back in June 2010. However, the currency headed toward months of depreciation against the US dollar after the central parity rate of the Renminbi hit a new high against the dollar on Jan 13 at 6.095.
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Analysts have forecast that greater two-way fluctuations of the Renminbi may become a normal trend in the future.
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China's central bank governor Zhou Xiaochuan reiterated on Thursday that China is likely to have fully liberalised interest rates within two years, but the timetable will depend on economic circumstances at home and abroad.
