FASTER CHINA INTEREST RATE REFORMS MAY BE LINKED TO SHADOW FINANCING SURGE, SAYS S&P

PREMIUM CONTENT. To continue reading please login, or click on SUBSCRIBE above.

July 22, 2013

SINGAPORE – Ratings agency Standard and Poor’s is suggesting that the surge in shadow financing may be behind a move by the People’s Bank of China to hasten interest rate reforms. The PBoC on Friday announced that it was giving up its role in guiding commercial bank ending rates, leaving control of commercial banks’ deposit rates as its main price-based policy instrument. S&P says that, if the central bank frees up deposit rates as well, it is likely to have to adopt a more conventional monetary policy framework by targeting a money market interest rate.