Conditions and Supporting Policies for Interest Rate Liberalization

Interest rates are the core benchmark of financial markets. Since China’s economic reforms are yet to complete, financial transactions in China during the transition period have been more or less guided by a distorted interest rate system controlled by administrative forces, which seriously impedes the improvement of financial resource allocation efficiency. For this reason, the Third Plenary Session of the 18th CPC Central Committee called for “expediting interest rate liberalization and improving the Treasury bond yield curve to reflect market supply and demand.” Obviously, advancing interest rate liberalization to give play to the role of finance in resource allocation will be a key element of China’s financial reforms for some time to come.