News / Economy

China to Lift Bank Lending Rate Controls

An employee counts Chinese yuan notes inside a bank in Taipei, Feb. 6, 2013.
An employee counts Chinese yuan notes inside a bank in Taipei, Feb. 6, 2013.
VOA News
China is lifting some controls on bank lending rates, in a step toward a more market-oriented financial system.
 
China's central bank said Friday it was canceling the "floor" on interest rates to be paid by borrowers, so that financial institutions can set the rates themselves. The change will go into effect on Saturday. 
 
A floor will remain for mortgage loans. The central bank says it is not adjusting rates for mortgage lending in order to protect the country's property market from speculation.
 
The overhaul is seen as an effort to help China's economy, because cutting lending controls could prompt banks to make more loans and therfore inject more capital into the economy for business and other investment. 
 
It is the first major economic reform under President Xi Jinping, who took office earlier this year. 
China's liberalization of interest rates could eventually lead to lifting limits on capital flowing in and outflows across China's borders.

Note: An earlier version of this story included erroneous references to 70 percent interest rates. The previous floor for interest rates was 70 percent of a government-set benchmark rate, not 70 percent of the loan amount.

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