Caixin Explains: China Takes Another Step to Unshackle Interest Rates

China’s central bank is testing the waters for a new mechanism that will give banks more freedom to set their own deposit rates, the latest step toward realizing its long-standing goal of liberalizing interest rates.

Lenders are being encouraged to adjust deposit rates using a deposit interest rate marketization mechanism, which was rolled out in April by the Self-Discipline Mechanism for Market Interest Rate Pricing, a banking industry body overseen by the People’s Bank of China (PBOC). The central bank disclosed the new mechanism in its first-quarter monetary policy implementation report released on May 9.